As flights are cut, airfares go up, at least at first
Over the past eight years, many airports have seen their numbers of domestic seats drop and flight prices surge.
In the past eight years, a period when the airline industry experienced a flurry of mergers, escalating fuel costs and a global recession, many airports that experienced deep cuts in service have seen steep spikes in fares.
A USA TODAY Network analysis of the country's top 100 airports in the 48 contiguous states found that on average, those that lost at least a quarter of their domestic seats since the start of 2005 saw nearly twice the average fare increase over the past eight years. The analysis is based on inflation-adjusted fare data from the Bureau of Transportation Statistics and airline schedule data from OAG Aviation Worldwide.
That trend worries some industry watchers as American Airlines heads to court Monday to get what will likely be the final approval needed for it to close its merger with US Airways.
Past mergers have resulted in the new partners shedding some hubs and cutting flights at some airports as they focus on more profitable routes and hubs.
'If you look at the pattern of the past large mergers, you see flight reductions, personnel reductions, service reductions and fare increases,'' says Brent Bowen, dean of the College of Aviation at Embry-Riddle Aeronautical University's Prescott, Ariz., campus. 'When these airlines merge and combine ... you'll see former hubs not being hubs anymore. That's just the reality of it.'
Representatives of American Airlines, which has been under bankruptcy protection since November 2011, are scheduled to meet in bankruptcy court Monday in New York City to get approval of the company's restructuring plan. A green light would essentially clear the way for it to finalize its merger with US Airways, a deal that will create the largest airline in the world.
The two airlines overcame their perhaps most formidable hurdle earlier this month, when they reached a settlement with the Justice Department, which had sued to block the tie-up but backed down when the airlines agreed to give up dozens of take-off and landing slots at New York's LaGuardia and Ronald Reagan Washington National airports.
American and US Airways also said they would maintain their hubs in Los Angeles, Charlotte, New York's JFK, Miami, Chicago O'Hare, Philadelphia and Phoenix for three years. They'd made an earlier commitment to keep their merged headquarters in Dallas-Fort Worth for the same period.
Unlike some previous mergers, US Airways and American don't have as much overlap in their routes, says William Swelbar, a research engineer with MIT's International Center for Air Transportation, which could lessen the need for cuts. Still, 'I think all of us who observe the industry are skeptical they're going to maintain all eight hubs,'' he says.
The cutbacks in service that have hit most of the nation's top 100 airports in the past eight years reflect an airline industry that has been transformed as it tried to stay afloat amid escalating fuel costs and a global economic downturn. Onetime rivals have merged, allowing them to focus their resources on bigger, more profitable hubs, and airlines have become extremely disciplined, careful not to fly more seats in a market than they can profitably fill.
'That's what consolidation has allowed them to do, because they can generate the same amount of revenue doing less of the flying,'' Swelbar says.
Fewer flights in a market generally mean higher ticket prices.
'When capacity goes down, that means fewer seats are available, and inevitably, fares get squeezed, and they rise,'' says Henry Harteveldt, a travel analyst with Hudson Crossing.
Delta still has a hub at Cincinnati-Northern Kentucky International Airport, but the number of flights there has been cut since the airline declared bankruptcy in 2005.(Photo: M. Keith Dykes)
Cincinnati remains a Delta hub, but its airport has steadily seen its number of domestic flights shrink in the wake of Delta declaring bankruptcy in 2005 and then merging three years later with Northwest, which had an overlapping hub in Detroit.
USA TODAY's research found that Cincinnati/Northern Kentucky International Airport saw its number of seats plummet 80% between the first quarter of 2005 and the first quarter of 2013, as Delta slashed flights and the airport lost service from Northwest as well as Continental, which merged with United in 2010.
Fares spiked 26% during that eight-year period, to an average ticket price of $519 - the highest of the 100 airports reviewed.
'Delta was using Cincinnati in the same way Northwest used Detroit,'' Swelbar says. 'They consolidated those (traffic) flows around Detroit.'''
Meanwhile, Indianapolis International Airport saw domestic fares increase 23% between the first quarters of 2005 and 2013, and its number of domestic seats plunged 39%.
The airport suffered deep cuts in air service and saw fares escalate after ATA, a dominant carrier there, went into bankruptcy and eventually folded. Cutbacks continued when Northwest shrank its Indianapolis mini-hub after joining forces with Delta, said Chris Matney, the Indianapolis airport's air service director. And other mergers also led to fewer flights, less competition and higher fares.
'When it came time to take the medicine the airlines were doling out across the whole U.S., we took more than our share,' Matney says.
High jet fuel prices, a key reason airfares increase, also had an impact in Indianapolis. But this year, Matney says, ticket prices finally started to stabilize and several carriers are adding new routes, including non-stop service between Indianapolis and Los Angeles, San Francisco and Trenton, N.J.
'We're turning around from a long run of negative air travel.'
The agreement by American and US Airways to give up slots at LaGuardia and Reagan National will reduce some of their service between those airports and smaller cities. But they might add flights between those communities and their other hubs, such as Philadelphia, Harteveldt says. Additional service could lead to lower fares, and wherever American and US Airways exit, lower-cost carriers such as JetBlue, Spirit or Frontier could enter.
When all is said and done, some industry experts say, airline tickets can only surge so high.
'Airlines know they can push fares only so far,'' Harteveldt says. 'The consumer has access to all kinds of prices and price information, and we as the traveler remain highly empowered.''
Contributing: Jeff Swiatek at the Indianapolis Star; Barbara Hansen and John Kelly, USA TODAY
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