Air Genius Gary Leff on market power for airlines
Read the whole post, but are is an excerpt:
With oil hovering around $100 a barrel we did see airfares rise 2011-2014 but then return to long run trend, and indeed real airfares inclusive of fees were lower 2016-2018 than in 2010…
Indeed the drivers of increased airline profits are:
- lower fuel prices
- richer co-brand credit card deals.
As I’ve pointed out in many recent quarters the entirety of American Airlines profit has been accounted for by its co-brand credit card deals and not flying. The richness of these deals for airlines has grown markedly. This may be partly attributable to industry consolidation (fewer airlines for banks to negotiate with) and partly due to American Express losing its deal with Costco which set off a chain of renegotiations at higher price points.
Consolidation has improved airlines’ bargaining position vis-a-vis banks more so than consumers. And indeed with fuel prices up from three and four years ago profits are down…
Moreover it’s the ultra low cost carriers – Spirit, Frontier, and to a lesser extent Allegiant – that have been the driving forces in the U.S. airline industry.
Do read the whole thing.