Paula Pecorella: Have you noticed that flying just… keeps getting worse?
Between the mass cancellations, seats getting smaller and smaller, and the advent of the pay-for-literally-everything-separately model, you might be thinking that the airline experience couldn’t get any worse.
But you’d be wrong.
JetBlue and Spirit Airlines are trying to merge, and if approved, it’s going to make services even crappier and prices even higher
So I wanted to find out how a few massive airlines could get away with making record profits while the services they offer continue to get more and more terrible.
This is a story about how politicians bankrolled by giant corporations have allowed just 4 airlines to have nearly total control over your flying experience.
Buckle your seatbelts and prepare for takeoff, we’re about to find out how flying became a nightmare, and what we can do to fight back.
[Compilation of Customer Clips]: “The past 24 hours I’ve experienced the worst…” “I could fly a kite to my next destination…” “This is why you should never fly…” “The worst travel experience of my life.”
Bill McGee: So let’s, let’s boil it all down. Why is this happening? What, what is this all about?
Paula Pecorella: That’s Bill McGee, an aviation expert who knows a thing or two about flying.
Bill McGee: In the 1960s and 1970s. It was actually a much better experience for consumers. Pricing made sense because it was based on costs. Seats were not only comfortable, they were not a threat to safety. Amenities and service were at a peak and airlines competed based on service.
Paula Pecorella: And he’s not kidding. Back then, planes used to have spiral staircases, grand pianos and full service bars with room to move around in the sky!
These days, it feels like getting a bag of chips is hitting the lottery. So how did they have it so good back then?
Bill McGee: Prior to 1978, the government through the Civil Aeronautics Board controlled the airline industry. And by control, it meant that they not only decided what airlines could fly where and how often, but they also determined the prices.
And then the feeling in 1978 was that the best way to expand airline service would be to deregulate it and to allow the quote, unquote, free market to take over.
Paula Pecorella: Well that sounds promising! How did it work out?
Bill McGee: Um, none of that has really worked out.
When deregulation took effect in late 1978, suddenly there was an influx of new airlines. In fact, we saw about 50 new airlines in the 1980s.
None of them are around anymore.
I think it’s fair to say now, 45 years later, that airline deregulation has been a failure.
Paula Pecorella: You see, without all that regulation, there was nothing stopping the biggest and most successful airlines from eating up all the little guys.
In fact, the marketplace has gotten so bad that from 2007 to 2021, there wasn’t one single new passenger airline in the entire US industry.
Bill McGee: We have fewer scheduled passenger airlines in the United States than we have had since the first ticket was sold in Tampa in 1914.
Paula Pecorella: Right now, American, Delta, Southwest, and United own 82% of the US airline market.
Bill McGee: There’s no question. The big four airlines, each one of them is now too big to fail.
Paula Pecorella: With this much consolidation over the industry, these carriers can pretty much do whatever they want. They can price gouge, they can shortchange customer service, they nickel and dime their workers all without losing any customers.
Bill McGee: the industry has not only become too big to fail, but I believe this sincerely, I think they’ve also become too big to care.
Paula Pecorella: And this…is how it’s about to get a lot worse
Jetblue is trying to merge with Spirit, and if they’re successful, JetBlue would become the fifth largest airline in the U.S.
But why is that such a big deal? if they aren’t one of the big four that control the whole industry, then what’s so bad about it?
Bill McGee: The only reason that fares are as low as they are on average is due to the ultra low-cost carriers like Spirit. And if Spirit goes away through merger with JetBlue, there is no question. All you have to do is take out Spirit’s Route Map, look at every single city that Spirit serves, and you can guarantee that fares are going to rise in all of those cities on all of Spirit’s routes.
Paula Pecorella: Take Detroit, for example. Spirit offers tons of nonstop flight options out of the city; JetBlue however operates much fewer.
If they merge, it’s likely that JetBlue will cut down on flights, forcing consumers to pay higher prices for the ones that remain.
And Detroit won’t be alone. Lots of other cities would face the same problems.
This is an important point. It’s the legal argument that gives the Biden Administration standing to block this merger: the law gives them power to block mergers that stifle competition and give consumers fewer choices, and there’s no question that that’s exactly what this merger would do.
Sounds like we could soon be looking at paying JetBlue prices for…Spirit service?!
[Clip of Andres Barry]: At the end of the day competition is good.
Paula Pecorella: That’s JetBlue’s own President and COO, who later goes on to say
[Clip of Andres Barry]: JetBlue needs to be bigger to compete with the big 4 carriers.
Paula Pecorella: Wait. something doesn’t add up here.
If bigger companies and more mergers led to more competition, then why aren’t we seeing any new airlines in the industry? And why are prices always going up and service always getting worse?
Bill McGee: The idea was that we were gonna break the shackles of government oversight, and we would have all this new competition and we would have lower fares and more service and better service. Um, none of that has really worked out.
Paula Pecorella: Studies have shown that the average seat size has shrunk by 3 inches in the last 15 years, but that hasn’t stopped the airlines from charging more if you don’t fit in the seat that they just chose to shrink. Paying just to bring your bags on board similarly only started in 2008, and by 2019, the airlines were profiting nearly $6 billion dollars per year from this gimmick.
And what do they do with that money? Spoiler: they aren’t making air travel any better.
Bill McGee: We have the worst of both worlds with the airline industry. When they go to Congress asking for a taxpayer bailout, they describe themselves as a utility. But at the same time, they’re run as a quote unquote free market enterprise. So we get to bail them out and we get to pay to, uh, to keep them, to keep them running, even though we get nothing in exchange in terms of consumer protections from Congress or from the DOT. Um, but at the same time, when times are better and the airlines start making money, where does that money go? Does it go back to the taxpayers? Does it go back to the passengers through lower fares? No, it goes into stock buybacks. It goes into executive compensation, it goes into executive bonuses.
Paula Pecorella: In the last decade, 96 percent of airline’ free cash flow in the last decade has been spent on stock buybacks.
It’s pretty clear that the government’s approach in the past to approving airline mergers has been a disaster for everyone except super-rich CEOs and Wall Street.
Bill McGee: I’ve never heard of a case where doubling down on bad policy makes it better. It’s not going to.
Paula Pecorella: So there you have it, folks, consolidation of the airline industry has brought on nearly every problem travelers are now dealing with as crappy, high-cost service is increasingly becoming the only option.
But the good news is we’re not powerless to stop it.
Bill McGee: Thankfully there seems to be a new team at the Department of Justice now in the Biden administration. They’ve been very robust about these issues of antitrust and consolidation and mergers.
Paula Pecorella: The Biden Administration is the first in decades to show willingness to fight growing monopoly power.
The Department of Justice and the Department of Transportation both have tools at their disposal to block this $3.8 billion JetBlue/Spirit merger.
They need to act.
Because at the end of the day, airline mergers are good for only 2 things: lining the pockets of shareholders, and making the flying experience miserable for the rest of us.
