The airline industry has a lot of issues, but it's not a monopoly. In fact, the reason we no longer have free bags is that the industry is in a state of price war, due to competition. Airlines want to reduce their ticket costs as much as possible, and this leads to little margin on the tickets, so they save costs by not giving free bags.
This helps stratify the market as well, because those who travel light (mainly business people and people who fly a lot) now pay less than they used to. Those who fly irregularly (i.e., tourists) are more willing to pay the fees.
>Is the airline industry disrupt-able enough for market forces to make changes?
It has been disrupted already ... many times. Some disruptions came as a result of relaxation of certain regulations, such as allowing twin engine jets to fly over the oceans, or not forcing airlines to fly direct routes. There's also the revolution around using deep statistical modeling for capacity and route planning and scheduling. There's the business models of RyanAir and Emirates ... I mean, this industry has changed quite a bit.
Flying is also cheapest AND safest it has ever been (though more uncomfortable). Seems like market forces are working just fine.
Are they though? How come the US doesn't have the equivalent of a Emirates/Singapore quality level airline? You can't tell me there is no demand for that level of service by business folk?
Laymen's explanation - there are a limited number of routes that can physically be established and those who have the routes exhibit rent seeking behavior with only just a small amount of competition. In other words an oligopoly.
Those airlines already exist, and would be eager to operate in USA and provide us with service superior to that provided by domestic carriers. The "market failure" is regulations that prevent foreign carriers from serving domestic routes.
Emirates is a state-owned enterprise and there are a lot of accusations that it's subsidized by the state through below-market borrowing.
Your question is also kind of like asking why HP laptops are lower quality than Apple laptops. Emirates uses its Dubai base to serve primarily lucrative international flights, just like Apple targets the premium end of the market. That doesn't mean that HP is in a market segment without competition, however. Rather, it targets a cost-sensitive portion of the market where people aren't willing to pay extra for quality.
My view is that is the Emiratis want to squander their money on giving at-cost fuel and basically-zero-interest loans to their flag carrier, that's on them.
It's not as though the US air market isn't heavily protected. You'll note that foreign carriers like Emirates can't fly domestic routes. If I fly Qantas to NYC, half the plane gets off in LA and nobody else can get on. Which is part of why "Qantas ticket" is the ancient Yolŋu word for "financial ruin".
> why HP laptops are lower quality than Apple laptops.
So why can I choose to buy either an Apple laptop or an HP one in the US, but don't have the choice to fly on Emirates from Chicago to NYC? I think you missed my point entirely. There is a market of people willing to pay for superior quality airline service, there is just no supply for it, because of regulation.
We don't have it due to the business culture of America.
They're agressively seeking to increase profit margins.
That meant that expensing has stripped away the ability to book business class tickets. (That is arguable if that's a good idea or not given the complexity of tickets)
The aggressiveness about seeking higher profit margins at all costs has also meant that the money that would be available for those things are considered to be "fat".
The closest that you have with the Singapore/Emirates setup is United Polaris and Global Services.
Regulations are certainly part of the story, but make no mistake, regulation don't work without market buy-in. If a regulation stands in opposition to market forces it will fail miserably. For example, car fuel efficiency regulations tend to lead to cheating, and non-compliance (which leads to non-enforcement because regulators give up on them) if they stray too far from reality. Furthermore regulations don't innovate. It took aviation engineers to design and build super-safe passenger jets, and airlines (along with engineers) to maintain them - bureaucrats don't do any of that. But yes, regulations have a place.
The FAA and the NTSB are the reason there is market buy-in to begin with. Consumers would never have adopted air travel and driven global economies of scale to the extent that they have without those two agencies reassuring the public that they wouldnt go up in a giant fireball along with 200 others just to go to Cabo.
>It took aviation engineers to design and build super-safe passenger jets, and airlines (along with engineers) to maintain them - bureaucrats don't do any of that.
Companies won't do that unless forced to by regulations. Also, your post that I replied to implied that it was all market forces.
Companies don't care about people, for one and for two, the problem is that safety is one of those things that companies will gladly brush right against the edge of for the sake of profits.
To draw a point of comparison many companies know that their infrastructure is vulnerable to hacking or data leaks. The reason why they don't fix the problem in the first place is because they've ran the cost analysis and realized that the cost of securing their system is more than the potential ramifications of losing customer data.
1. Wow, WizzAir, and Norweigan air has created a lot of competition on the airline front and price wars. EDIT: Forgot to mention their point to point system has also benefited many towns that wouldn't dream of traveling to Europe.
I've flow with Norwegian Air and I actually liked them. They're like the Southwest of transatlantic flights. The legacy carrier's response has been "we'll just lower our prices" and decrease benefits on all sides. (I.e. basic econ)
2. The newer carriers have had the money to lease new airplanes that are much more fuel efficient. I think that's where the legacy carriers have done does bad planning for the last decade. (They're just not buying 787s and they're depending on ERJ/CRJs)
Problem is those low cost carriers also huge prices away. They’re not always that much cheaper than the legacy carriers - especially if you’re looking at premium econ.
Depends. I frequently see after the flight is priced out. Norweigan+partners can outprice the legacy carriers. Many times they're exactly the same price. Sometime's they're a better value. (I'm looking at Southwest's ticket flexibility as a standard feature)
Market forces have made changes. They've pretty much demonstrated that people make decisions based on the cheapest base fare. So the airlines have mostly (and even the newer airlines have moved in this direction over time) added baggage fees, board early fees, significant change fees, seat selection fees, etc.
The frequent fliers are mostly immune to all this and the family visiting grandma is often going to pick the absolute cheapest flight.
Southwest has continued to grow over decades of airline bankruptcies, mergers, and pricing shenanigans. If you are a first class or business traveler, that is what the other airlines are focusing on, go with them. If you are just a regular flyer, southwest focuses on your demographic. Things they do that almost no other US carrier does. Two checked bags are free, good to cheapest fares, same price whether you buy a one-way or round trip, cancel your flight anytime and get full credit for it on your next purchase. These are great features I use all the time. I always fly them if they have non-stop flights to where I need to go.
>They've pretty much demonstrated that people make decisions based on the cheapest base fare.
Nope. For example the business sector market doesn't necessarily look for cheapest fares. For that market (which is quite big) there are other considerations, like minimizing layovers, in-flight comfort, lounge access, priority boarding, etc.
Yes, I should have said mainstream personal travel. As someone who travels mostly on business, I'm not the one picking the absolutely cheapest base fee.
On the other hand, those business travelers mostly don't even care about early boarding or baggage fees anyway because they're either expensing them or get them for free because of status.
You are very fortunate. I often flew trans-Atlantic for a former company and their travel secretary was under instructions to find the absolute cheapest fare without consideration. So I occasionally ended-up with weird connections in Manchester or Newark instead of a non-stop from Dublin.
Not entirely - in-flight wifi, extra legroom, lie-flat business class, and seatback-controllable entertainment & food service are innovations that have spread across the industry because carriers found that customers will switch airlines to get access to them. In many cases they're even moneymakers, with customers willing to pay extra for them.
I think that the industry has generally found that price-discrimination is a powerful tool, though. The business traveler flying Sydney<->SFO on the corporate dime will pay the extra several thousand for lie-flat seats; the upper-middle-class family with bored kids will pay for wifi and tablet holders; but keeping those (and baggage, prime seat selection, early check-in, etc.) optional keeps flying accessible to the working-class laborer who needs to fly home for a funeral.
Fully agree. We're really seeing two divergent trends.
Fees for everything for the price-sensitive masses.
And, for business travelers with status (who are at a minimum less price sensitive and typically don't pay most of the base level fees anyway), somewhat better seating as a perk, much better seating for upgrades/upsells, a premium class of airline clubs among the base level (e.g. United's Polaris Clubs), etc.
And, as you say, I don't really have a problem with all this because it makes flying much more affordable for those that find the most bargain economy ticket a big expense. While I might personally enjoy it more, you don't really want a world where lie-flat seats are required on all 5+ hour flights.
This fall I recently started flying again after having not flown since 1999, and I've been making it a point to only fly Southwest because they're the only airline that's even remotely consumer friendly.
The opposite of "monopoly" is not "disruption" but instead "competition." Disruption moves a market equilibrium, usually due to a fundamental change in technology. But even a market in a steady-state equilibrium are subject to market forces so long as they are sufficiently competitive.
E.g. Amazon is disrupting retail. But even before Amazon existed, retail was highly competitive, with market forces driving down prices. (Indeed, there is a good argument that Amazon is decreasing competition even as it disrupts the market.)
I remember flying under the old heavily regulated airline system, where the FAA set routes, etc. Flights were often half empty. That practically never happens now. Flights are much more convenient and cheaper as a result.
