Flying on a plane these days is a humbling and sometimes humiliating experience. Basic amenities are being removed and there is no telling where the competitive devaluing of the customer experience will end.
The trends are disturbing. Seat width for the major carriers has shrunk from 18.5 to 17 inches, and seat “pitch”—the distance from one point on a seat to the same point on the seat in front—has shrunk from 35 to 31 inches. Meals and checked bags are no longer included. In 2017, the average fee for merely changing a reservation across the top four legacy carriers was $200; how that figure relates to costs is a mystery. Customer service at the airport is virtually nonexistent. We read in horror that some stranded passenger waited 12 hours in a queue to meet with a real-life representative.
And don’t get me started on the bathrooms, which are now so narrow that all but the smallest of passengers must practically exit in reverse. We get it. It doesn’t take an advanced economics degree to understand that bathrooms fail to generate incremental revenues for the airlines, and in fact are costing the carriers revenues by displacing floor space that could otherwise be used to squeeze in more rows.
In an age when revenue management and cost efficiencies are sacrosanct, can weak competition among airlines be counted on to keep bathrooms from shrinking further or from being removed altogether? If passengers could be induced to wear catheters in exchange for lower fares, would that be a good thing? What’s to stop airlines from stacking passengers vertically, like beef sides hanging in a meat locker?
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Competition is typically judged in terms of prices and their relation to incremental costs; the larger the gap, the greater the exercise of market power. But firms compete, at least in theory, in other dimensions as well, including over quality of service. Shrinking seat sizes can be understood as an exercise of market power by airlines—a quality-adjusted price increase in the base fare.
In his new book, The Great Reversal: How America Gave Up on Free Markets, NYU professor Thomas Philippon studies trends in airline consolidation and profitability. (It bears noting that the three large mergers that contributed mightily to airline consolidation occurred between 2010 and 2014, under President Obama’s Department of Justice, implying that lax antitrust enforcement is not exclusively a Republican problem.)
Philippon shows that airline concentration at the national level increased from about eight equal-sized firms in 2008 (an HHI of 0.13) to less than four equal-sized firms by 2015 (an HHI of 0.28). (HHI stands for the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration. The relevant HHI for competition purposes is at the local route level, discussed below, which is significantly larger than the national HHI.) At the same time, he finds that U.S. airline profits have jumped from near zero to positive levels.
According to Statista, airline margins in North America rose from 5.7 percent in 2010 to 14.4 percent in 2015. By 2018, airlines were posting a net profit of nearly $15 billion, and average profit per passenger was roughly $16. The profitability of airlines did not necessarily come from higher base fares; bag fees accounted for over 40 percent of their after-tax profits in 2018. Given the new ancillary fees, the effective price of flying is higher, or put differently, the quality of service is lower for the base fare, and the pricing is more discriminatory.
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Congress can end these shenanigans by simply mandating a minimum seat size and pitch. No safety study is required; just the will to exercise their power. Potential elements of a real passengers’ bill of rights—minimum seat size, minimum pitch, limits on overbookings, holding some capacity open for disruptions—could upset the airlines’ best-laid traffic management plans. But this is a small price to pay to reclaim our dignity while flying.
How Airlines Exploit Laws to Literally Squeeze Customers
There oughta be a law! LOL!
Or, just avoid the airlines and the security theater and drive.