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January 17, 2014

Airline fares up only slightly in past 10 years even with industry consolidation, report says

Consumer airfares have barely budged in the past ten years even as the industry has consolidated with several large mergers, according to a new report by PwC US.

The consulting group, formerly known as PriceWaterhouseCoopers, found that airfares have risen only 2 percent in the last decade and when inflation is factored in, airfares have declined 0.5 percent.

"If you look back over the last ten years you really don’t see a significant overall increase in domestic fares as a result of these mega mergers," said Jonathan Kletzel, PwC US Transportation and Logistics practice leader and author of the report.

Although the mergers between Delta-Northwest, United-Continental, Southwest-AirTran and American-US Airways have reduced the number of airlines serving domestic airports, consumers have benefited from the deals as the airlines have improved their operations and customer experience, the report says.

Passengers had a 26 percent decrease in flight cancellations and arrival delays are down 17 percent in the last five years. Airlines are also losing fewer bags, lowering its report of mishandled bags by 31 percent to 3.2 incidents per 1,000 passengers.

"Because of the bag fees, you have more people carrying on bags. That plus the reduced number of flights means there are fewer bags being checked and a better chance your bag won't get lost," Kletzel said.

Low cost carriers have also expanded into most major domestic markets with passenger traffic up 15 percent since 2008. Carriers like Southwest Airlines and Spirit Airlines now control 30 percent of the domestic traffic market.

"The markets [the LCCs] serve, in many cases, they are underserved markets," Kletzel said, adding the capacity and demand for travel is there for continued growth in the domestic travel market.

-Andrea Ahles


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