What effect does airline consolidation have on passengers?
In 1980, airline passengers were able to choose from two dozen different airlines operating across the United States. Yet even as air traffic has grown over the past few decades, the number of airlines has shrunk to just nine today. Competition for passengers remains intense with a number of bankruptcies and acquisitions in recent years. Today, the four largest airlines (American, Delta, United, Southwest) carry 76 percent of U.S. domestic passengers.
How are airlines making money?
Airlines in the United States are experiencing their most profitable years since deregulation. However, average ticket prices are much lower than they were in the 1980s and early 1990s. So what is responsible for airlines’ financial success?
Jet fuel prices have dropped significantly. Why haven’t ticket prices?
In 2014, global oil prices suffered their sharpest drops in seven years. This led to similar reductions in the cost of jet fuel, which declined more than 50 percent in the third quarter of 2014. In fact, Figure 1 shows that by 2016, fuel prices were at the lowest levels in a decade.
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