This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. For an explanation of our Advertising Policy, visit this page.
With a handful of high-profile airline mergers occurring over the last several years, many flyers may be wondering what effect they’ve had on fares — specifically between former hubs due to decreased competition. TPG Contributor JT Genter explores the data below.
The last decade has seen tremendous consolidation among the US-based airlines: Delta merged with Northwest, United with Continental and — most recently — American Airlines merged with US Airways.
The fear among travelers and the Antitrust Division of the US Department of Justice was that these mergers would reduce competition and increase fares. After all, in the six years before these mergers began, dozens of airlines were found to be illegally fixing prices — leading to $1.7 billion in fines. But, the airlines successfully convinced their regulators that these mergers were necessary and wouldn’t result in price-gouging the traveling public.
So, how have things ended up?
As you can see, there’s a bit of a climb in average airfares since the mergers began. However, when you factor in the state of the economy through this time period, there really isn’t a meaningful upward trend that could be attributable to the mergers.
Does this conclusion not feel right to your experience? Well, this chart is simply presenting average airfare across the country. As they say, your mileage may vary. If you look at fare changes city by city, there’s a lot of variation.
Aviation Guru pulled the average fare data for flights between current and former hubs to study the direct impact of reduced competition. For example, would the consolidation of Delta and Northwest cause average fares to increase between Atlanta (ATL-Delta hub) and Minneapolis (MSP-Northwest hub)?
As you can see, hub-to-hub routes greatly increased after the Delta merger was finalized at the end of 2009. On average, these twelve routes increased ~27% from 2010 to 2015. The large outlier is clearly flights between Memphis (MEM) and ATL, which soared nearly 90% from 2010 to 2015. Only one of these twelve routes decreased post-merger: MEM-New York City (JFK).
So, what about the United-Continental merger?
While the merger was approved by regulators and shareholders in 2010, the merger wasn’t completed until late 2011. Interestingly, 2010-2012 showed significant fare increases among the hubs — soaring ~28% on average in just two years.
However, once the merger was completed, fares between United and Continental hubs have returned closer to 2010 levels, with the average increase over five years being under 10%. Interestingly, if you use 2011 — instead of 2010 — as the base year, average fares between hubs dropped ~10% on average.
While airfares haven’t dramatically increased nationally after the big three airline mergers of the last decade, there have been some big winners and losers from the airline mergers.
On average, airfares between former Delta and Northwest hubs increased substantially — much more than the national average — demonstrating that the Delta-Northwest merger wasn’t good for hub-based flyers.
However, airfares between United and Continental hubs have seen much more modest increases over the last five years, and the fares have actually decreased on average over the last four years.
For much more detailed analysis, check out the articles on this topic on Aviation Guru:
Did you feel the pinch of increasing fares due to an airline merger?
With great travel benefits, 2x points on travel & dining and a 50,000 point sign up bonus, the Chase Sapphire Preferred is a great card for those looking to get into the points and miles game. Here are the top 5 reasons it should be in your wallet, or read our definitive review for more details.
- Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
- Chase Sapphire Preferred® named a 'Best Travel Credit Card' by MONEY® Magazine, 2016-2017
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- No foreign transaction fees
- 1:1 point transfer to leading airline and hotel loyalty programs
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
- No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards