The airlines thought of themselves as a service industry and competed with other airlines to make every customer feel important, comfortable, safe, special. That’s a long time ago, at least in the U.S. The airlines are flying garbage cans now and there’s no thought about making anyone feel special, appreciated or even wanted.
So… what ruined the airline industry? 9/11? Consolidation? The COVID pandemic? Deregulation? Of course they all had a role to play in destroying the industry. (I suspect AI did too but I have no proof yet.) When I was a kid, we had a lot of big airlines— Pan Am, American, United, TWA, Eastern, Delta, Northwest… I still have my frequent flier cards for most of them! They competed for your business. One of them— maybe it was Pan Am— would give you a free helicopter trip to Manhattan from JFK if you flew first class from L.A. Some of the airlines had actual gourmet meals served on fine china. Sorry for sharing the first world problems. How about ticket prices instead?
Merging and consolidation really kicked into gear after the neo-liberal Airline Deregulation Act of 1978 removed government control over routes and fares, which was theoretically supposed to lead to increased competition, instead of what actually happened: the exactly opposite. Deregulation paved the way for mergers and acquisitions as airlines sought to gain market share and achieve economies of scale (a fancy way of saying “firing people”). Significant mergers in the industry include the mergers of American and US Airways (2013), Delta and Northwest (2008) and United and Continental (2010), reducing the number of major carriers and consolidating market share among a few dominant players.
This is a very capital-intensive business, with high fixed costs associated with aircraft, maintenance, infrastructure and enormously well-paid top executives. By merging with or acquiring other carriers, airlines can spread these fixed costs over a larger operation, maximizing profits. Many US airlines operate “hub-and-spoke” networks, where they concentrate flight operations at a few key airports (hubs) and connect passengers to destinations through these hubs. Mergers and acquisitions have allowed airlines to strengthen their hub networks and increase connectivity, theoretically making them more attractive to passengers and enhancing their competitive position in the market.
At one time, long ago, airlines focused on full-service offerings and premium service. Following deregulation in 1978 and subsequent market changes, the airline industry saw significant consolidation and the emergence of new players, including low-cost carriers, but with just 4 now dominating the market, accounting for a lion's share of passenger traffic and revenue in the industry.
Without robust competition fares have gone through the roof and airlines have added on absurd fees and ancillary charges for services such as baggage, seat selection and shitty in-flight amenities. Several studies have examined the impact of airline consolidation on airfares and consumer welfare. One by the Government Accountability Office (GAO) in 2014 examined the effects of airline mergers on airfares and flight schedules and found that on average, airfares increased at airports where one or both merging airlines had a significant presence. The study also found that flight schedules decreased, with fewer flights offered on certain routes post-merger. Study after study has shown that airline mergers have led to higher airfares, reduced service quality, and decreased competition.
Yesterday the Department of Transportation announced new rules meant to make flying less hateful and meant to make passengers less able to be victimized. Airlines are now required “to promptly provide passengers with automatic cash refunds when owed. The new rule makes it easy for passengers to obtain refunds when airlines cancel or significantly change their flights, significantly delay their checked bags, or fail to provide the extra services they purchased… Prior to this rule, airlines were permitted to set their own standards for what kind of flight changes warranted a refund. As a result, refund policies differed from airline to airline, which made it difficult for passengers to know or assert their refund rights. DOT also received complaints of some airlines revising and applying less consumer-friendly refund policies during spikes in flight cancellations and changes. Under the rule, passengers are entitled to a refund for:
Canceled or significantly changed flights: Passengers will be entitled to a refund if their flight is canceled or significantly changed, and they do not accept alternative transportation or travel credits offered. For the first time, the rule defines “significant change.” Significant changes to a flight include departure or arrival times that are more than 3 hours domestically and 6 hours internationally; departures or arrivals from a different airport; increases in the number of connections; instances where passengers are downgraded to a lower class of service; or connections at different airports or flights on different planes that are less accessible or accommodating to a person with a disability.
Significantly delayed baggage return: Passengers who file a mishandled baggage report will be entitled to a refund of their checked bag fee if it is not delivered within 12 hours of their domestic flight arriving at the gate, or 15-30 hours of their international flight arriving at the gate, depending on the length of the flight.
Extra services not provided: Passengers will be entitled to a refund for the fee they paid for an extra service— such as Wi-Fi, seat selection, or inflight entertainment— if an airline fails to provide this service.
DOT’s final rule also makes it simple and straightforward for passengers to receive the money they are owed. Without this rule, consumers have to navigate a patchwork of cumbersome processes to request and receive a refund — searching through airline websites to figure out how make the request, filling out extra “digital paperwork,” or at times waiting for hours on the phone. In addition, passengers would receive a travel credit or voucher by default from some airlines instead of getting their money back, so they could not use their refund to rebook on another airline when their flight was changed or cancelled without navigating a cumbersome request process. The final rule improves the passenger experience by requiring refunds to be:
Automatic: Airlines must automatically issue refunds without passengers having to explicitly request them or jump through hoops.
Prompt: Airlines and ticket agents must issue refunds within seven business days of refunds becoming due for credit card purchases and 20 calendar days for other payment methods.
Cash or original form of payment: Airlines and ticket agents must provide refunds in cash or whatever original payment method the individual used to make the purchase, such as credit card or airline miles. Airlines may not substitute vouchers, travel credits, or other forms of compensation unless the passenger affirmatively chooses to accept alternative compensation.
Full amount: Airlines and ticket agents must provide full refunds of the ticket purchase price, minus the value of any portion of transportation already used. The refunds must include all government-imposed taxes and fees and airline-imposed fees, regardless of whether the taxes or fees are refundable to airlines.
Profit maximization and the resultant shitty service and arbitrary higher prices are a bi-product of unrestrained capitalism. The new rule goes a few inches towards the miles it will take to improve service... and perhaps even keep the doors from flying off mid-flight.
