2 Responses

  1. Gary Leff
    Gary Leff at |

    Fascinating stuff. Thanks for grabbing this data.

    After reading what you’ve written it sure doesn’t appear that the inclusion / exclusion of these routes alters the lede, “In recent years, the average number of competitors has not substantially changed in markets traveled by the majority of passengers,” which remains true either way.

    Consolidation may or may not reduce competition in these cities, it can also increase effective competition by creating viable second-largest airlines as competitors out of what were otherwise small/dispersed competitors at an airport.

    It’s not correct to say that passengers wouldn’t enjoy the benefits of competition even if these airports dropped to a single carrier. Don’t passengers at FLG have access to a competitive hub at PHX? And should the federal government really care about competitive service at MOD when it’s (by air) 57 miles from San Jose, 78 from San Francisco, 90 from Fresno?

    If the study said “changes in competition have not been bad for any consumers” it would be completely fair to say “but what about consumers x, y, and z?”

    But it doesn’t say that. The study, while having normative implications, does not say changes have been good or bad. It suggests that for the vast majority of consumers the number of competitors has not changed in a material way. And it says that analysis does not incorporate the effects of the AA/US merger.

    We also know the story on airfares — recent small uptick when including average fees paid, although on an inflation-adjusted basis still far lower than prior to deregulation even incorporating fees.

    The relevant message coming out of this study isn’t a bold claim about “consolidation is good for consumers” or any such.

    But rather there are a whole lot of effects out there, such as the advent of low cost carriers and increased effective competition, and when airlines cede markets others come in because there are very very few barriers to entry outside of slot controlled airports (or airlines with limited gate space where gates are already fully leased, but even there they can sometimes be subleased).

    And so “it’s complicated, and certainly more complicated than the standard narrative would suggest” seems like a fair statement to make.