Airline Consolidation: Just Like the Banks?

A friend shared an article that included a variation of this diagram about bank consolidation.
Notice the pattern: banks consolidated from 37 in 1994, to 19 in 2001, to 11 in 2005, and to only 4 in 2009. Banks became less accountable and more inclined to gouge customers for absurdly high ‘fees’ (e.g., stuff like $31 for each ‘overdraft’ debit card usage, even for $1 or $5 purchases … they offered so many conveniences, but not the easy service of automatically alerting customers and rejecting the debit request at the point of sale). The greed-driven policies at the consolidated banks eventually created a financial meltdown. They were labeled ‘too big to fail’, so as to justify the enormous bailout by federal officials, using public funds. Our public funds, used to reward the overpaid bank greedsters.

It struck me that the diagram looks just like what has happened with U.S. airlines, where today the vast majority of passengers are ‘served’ by only six airlines and the so-called ‘regional’ feeders they contract with. Our final six are American, Delta, Southwest, United, Alaska and JetBlue.

If there is one big trend that we can all agree is happening in the U.S. and across the planet, it is industry consolidation and globalization. The gap between big and small, and the fraction controlled by big, just keeps growing. We now have fewer (but larger) banks, grocers, hospitals and immediate-care chains, gas stations, telecom providers, etc. It is also reflected in the widening wealth gap between the 1% and the 99% … and, again, not just in the U.S., but also in corrupt banana republics and across the globe.

We only hope that this trend is not driven by corruption even in nations like the U.S. We only hope that, if in fact this trend is as unsustainable as it appears to be, the ‘market correction’ will be peaceful and not too painful. Are we becoming the biggest Banana Republic in the history of the world? We only hope not.

Yesterday’s SkyJustice Phone Conference

The featured speaker at the 9/29/2018 Sky Justice National Network monthly phone conference was Jim Spensley. Airline and airport consolidation was front and center. A few of the many interesting points discussed included:

  1. The ‘final-6’ airlines are consolidating their schedules into fewer (but larger) hubs; i.e., while a few airports are seeing growth in annual operations counts, most airports have declined substantially for decades now. [for data, see the aiREFORM analysis at this 1/17/2018 Post (1990 vs 2005 vs 2016 Operations: Exposing FAA’s Inaccurate Forecasts), and see also this 10/23/2017 aiREFORM Post (NAS Annual Ops Have Declined for Decades Now, And NextGen Is Just Hype)]
  2. Most commercial service airports within the U.S. National Airspace System (NAS) offer monopoly or near-monopoly service; i.e., the predominant pattern is either only one airline offers direct service between two airports, or one airline has strong dominance on that airport-pair. This pattern appears to be an antitrust collusion between airlines; it also appears that federal regulators, including DoT, DoJ and FAA, are willingly not acting to end this antitrust collusion. [see this 2014 aiREFORM analysis (A Table Showing the ASPM-77 Airports – (Peak Years, Traffic Declines, and Trends Toward Airline Monopolies)]
  3. While the general public assumes there is an economy of scale that lowers unit costs and thus causes ticket prices to go down at larger hub airports, the opposite appears to be happening. Two key reasons are:
    1. the monopoly power held by the hub-dominant airline enables them to get away with setting much higher prices; this is especially true on those feeder routes to/from cities served by no other airlines.
    2. the airport authority accumulates an enormous debt burden for massive airport infrastructure expansion, all of which is predicated on continued unsustainable growth rates. In other words, a balloon is inflated, catalyzed by FAA grant funding and laws that incentivize hub concentration, and the balloon becomes primed to burst. The sudden popping of an airport hub balloon can be triggered by a general economic downturn, or it can happen if/when the hub-dominant airline arbitrarily decides to move to another airport; a prime example is the former Delta hub near Cincinnati [KCVG].
  4. There are other, environmental costs associated with these consolidated hubs, borne by residents and other ‘non-airport stakeholders’, but both FAA and airport authorities work hard to ignore and even deny these costs. The consolidation of flights into fewer but larger hubs causes more noise impacts (both persistent and repetitive noise patterns), more air pollution (thus more health costs), more destruction of residential neighborhoods and communities due to ‘land-grabbing’ by the airport authority, etc.
  5. One of Jim’s key points was that the airport authority has considerable power to set policies, to choose to NOT expand excessively … but the airport authorities tend to be beholden to the airlines, especially the hub-dominant airline. Why would someone like the Port of Seattle, PANYNJ, or Massport be so subservient to the hub-dominent airlines? It all comes down to money, needed to expand plans (and annual bonuses, in some cases), and also needed to pay off past and future development debt. The fear of an abrupt airline departure – like Delta did at KCVG, American did at KSTL, and United is now doing at KCLE – creates a peonage, rendered on a massive scale.

Solutions?

So, who can solve the growing impact problems caused by airline consolidation and hub concentration? If both FAA and airport authorities are effectively captured, serving industry, we can expect they will continue to play a good-cop-bad-cop game, passing citizens back-and-forth to each other while offering no answers and no solutions. This is where we are today. It is why we depend even more on our elected officials. Especially in Congress, we need them to change the laws; take back what was taken from the people in the 1990 passage of ANCA [see this 6/9/2015 aiREFORM Post (Wendell Ford’s Edsel: Many of FAA’s NextGen Dirty Tricks were Also Used in the 1990 Passage of ANCA)]; restore local control, to include ensuring local residents have power over their airport authority; even, impose a steep carbon tax on aviation fuel, so that excessive airline hubbing is disincentivized.


See also:

Who is to Blame – and Who Can Fix – the Impacts Around U.S. Hub Airports?

NextGen Impacting Baltimore … and Why Congress Is Also Failing

The video about NextGen impacts recently posted by activists south of San Francisco is resonating far away, even near Baltimore, Maryland. Below is text from an email sent by a Maryland homeowner who has experienced the same noise and pollutant intensification due to NextGen route concentration:

I came across your website and first want to thank you for creating it. At the moment I’m feeling completely powerless in my current quest to do something about the effects of NextGen in my small town in Maryland.

The NextGen program was implemented at BWI last fall, and since then we have seen a ridiculous increase in air traffic over our neighborhood. There are days when it is virtually constant. We bought our house in this neighborhood last summer before we knew anything about NextGen. We had a few planes here and there, but they were at higher altitudes and not so bothersome. People here are used to some noise, as we are about 13 miles from BWI. But I, like you, have kids that I would like to protect. I’d like them to be able to swim in our pool without being worried that they are constantly breathing in particle pollution. The NextGen noise corridor also goes directly over several of our schools, our sports fields, and many neighborhoods from Annapolis and all the way north to the airport. I just feel like we never get a break from the planes, no matter where we go.

Here is the FAA letter I received. Interestingly enough, the letter says that there were environmental studies done for our area? But it’s my understanding that NextGen was exempted from EA. Also, their statements about noise and air pollution contradicts everything I’m reading, and more importantly, what I’m witnessing in my own neighborhood. It’s beyond frustrating.

Frankly, receiving yet another email like this further reinforces the obvious reality: FAA is a captured agency, and our Congress is essentially out to lunch. In the context of the current election debates, it is quite clear that our Congress has become derelict and is no longer compelling agency accountability.

How can we explain this? Decades ago, Congress passed legislation that taxed system users – especially airline passengers and people sending packages by air – to generate billions each year, for redistribution in ‘airport development’. We now have thousands of airports that have been developed, redeveloped, and developed again, all at public expense. Compared to other transportation infrastructure, airports are overdeveloped … and there is an awful lot of airport infrastructure that is severely underutilized (check out any major airport in Ohio, for example, such as [KCVG], with a triple parallel runway but abandoned by Delta, so today’s ops are down 75% from peak!). What’s more, the majority of today’s aviation impacts are being caused by airport development that would not happen if we did not continue to collect and use these public funds.

So, why does this problem continue? Well, it distills down to money. Our elected officials greatly enhance their chances for reelection if they bring home airport grant monies and smile in front of oversized checks. They have become severely addicted to money; this means that they just cannot say no to federal grants. Democrat and Republican members alike thus become subject to the proverb: “Don’t bite the hand that feeds you.”

FAA serves out the money, so while the voice in front of the camera may sound critical, the heart behind the voice always votes what FAA wants. In other words, the MAIN BENEFICIARIES of the current system are the agency (FAA) and the elected officials (Congress), none of whom are held accountable, yet all of whom can ‘look busy’ while issuing grant monies and waddling ineffectively while failing to fix the problems. Yup, create a problem then sustain the problem so you will always look busy!

Think about it for a minute and you can actually see: it behooves Congress to have FAA screwing up regularly, as this predictable failure ‘churns’ work, creating endless opportunities for Congress to ‘look’ busy. And it then circles back around: when an elected official browbeats FAA, FAA then looks busy, too, responding to the criticism while failing to resolve problems created by FAA itself! And ALWAYS, within their superficial responses (such as FAA’s response letter, signed by Diane Crean for Carmine Gallo), FAA will repeat the same slick phrases and empty assertions that prop up the many layers of propaganda and misinformation. What a racket!!

Our Collective ADD, and Some History on US Airways

The general public lacks awareness of major trends in U.S. aviation, not just in the past hundred years, but even in the past decade. Indeed, the current set of popular communications technologies (internet, twitter, etc.) bombard us with so much rapid information that Public memory has arguably been all but destroyed . Many of us fail to process events from mere weeks ago. So, it is not surprising that people have no idea how contentious U.S. aviation history has been, getting to where we are today, with just four remaining major U.S. airlines: American, Delta, Southwest, and United.

It does not help that all of our aviation professionals do nothing to nurture a citizenry that is vastly informed and technically savvy, empowered by knowledge. Instead, FAA, NATCA, A4A and other members of the Av-Gov Complex seem to want to keep us ignorant. So, they always tend to hand us off to technical experts, and shout off infinite acronyms as effective weapons of mass confusion. They religiously avoid talking about safety deficiencies, wasteful spending, controller errors, etc. And all this they do while speaking cheerfully, as if from a Koolaid Bowl, to promote air travel (and thus their personal paychecks and pensions).

In total, we have been collectively dumbed down; nearly all of us now suffer a substantial culturally-based Attention Deficit Disorder. This ensures that meaningful decisions by governmental agencies, such as FAA’s NextGen implementations, will continue to happen in a vacuum. It also means that most impacted people will be too flustered (or too distracted onto other life matters or by trivialities – hey, did you see the great catch by what’s his name?) to focus through repairing FAA’s damages.

US Airways: An Airline Dysfunction Case Study?

While researching a recent aiREFORM Post about FAA’s NextGen Hydra at Charlotte, NC, it became clear that a closer look at Charlotte, and the airline at the heart of the airport’s history, might help educate us all. There is much that needs to be learned….

…So, take a look at the Wikipedia page on US Airways. Especially, be sure to read their history, with bankruptcies in both 2002 AND 2004. This was one of the first major U.S. airlines to liquidate the pensions of its pilots, as they did in 2003. This is also an airline that built up a huge hub at Pittsburgh [KPIT], got the airport authority to spend billions in new facilities, then abruptly up and left when the airport authority refused their ultimatum to lower airline operating fees.

By the way, Pittsburgh is one a growing number of U.S. airports that have seen enormous federal investment, only to be abandoned by their main airline (see also Delta at Cincinnati [KCVG], American at St. Louis [KSTL], Northwest (now Delta) at Detroit [KDTW], and Continental (now United) at Cleveland [KCLE].

And on the subject of airline dysfunction, it seems notable that the newest merger – American-US Airways – is deeply at the heart of nearly all of the biggest NextGen rollout debacles: at Boston, Charlotte, Chicago, New York’s JFK, and Phoenix. This one airline, if they shook their head and said ‘NO’ to FAA’s NextGen routes, could make a hugely positive quality of life difference for hundreds of thousands of airport neighbors.

We need to know history…

…and we need to apply what we know. Otherwise, we will keep doing the same stupid things, over and over again. Money will be wasted. Neighborhoods will be ruined. And a slim few will get rich.