Phillip Longman offers an interesting piece in The Atlantic with the same title, noting the tension between too little competition squeezing consumers and too much competition leading to a race to the bottom in the US airline industry. Let’s take a closer look at his Spirit Airlines paradox argument and then I’ll argue why he misses one key point.
Spirt Airlines Paradox? No, The System Is Working
Longman’s argument goes something like this:
- Spirit Airlines provides valuable competition and keeps pricing in check.
- At the same time, Spirit is the “epitome of everything that’s gone wrong with flying, a leader in an industry-wide race to the bottom.”
- This includes practices like restricting refunds, shrinking seats, and charging for even the most basic amenities.
- The effect of Spirit has therefore been to “normalize loss of quality throughout the industry.”
- Today, the fundamental problem in air travel is not lack of competition; it’s “the lack of sensible regulation to channel competition to public purposes.”
- A lack of regulation creates far too much competition.
- The 19th Century rail system produced “redundant rail lines” across the US resulting in “ruinous” competition that hurt consumers
- During the period of airline regulation (1938-1978), “Airlines were effectively required to use some of the profits they earned on high-volume, high-margin, long-haul routes to maintain government-mandated service on low-volume, low-margin, short-haul routes”
- This created a predicable system for air travel and by limiting new entrants, “The airline industry remained modestly profitable and able to finance its technological progress.”
- Deregulation may have lowered prices in the macro, but left much of “flyover country ” without meaningful or cost-efficient air service.
- It also led to a losses and insolvency during the first decade of the 21st century.
- “Deregulation was supposed to lead to a flowering of competition; instead, today, there are only four major carriers, which together account for about 80 percent of the domestic market.”
His conclusion:
Networked industries require a broad regulatory regime that protects them from ruinous competition even as it shields the public from abuses of their power.
The Civil Aeronautics Board ship has sailed and will not return. But I see at least one key flaw in his analysis and also history neglected.
First, the reason why the US airline industry struggled though the 2000s was 1.) the 9/11 attacks which crippled demand for air travel and 2.) the “Great Recession” of 2007-2009. It was not “ruinous” completion.
Second, and more importantly, while I also support consumer safeguard in the case of passenger delays and cancellations, Longman overstates the elimination of service to flyover and underemphasizes how much airfare has actually fallen since the end of regulation in 1978.
By every measure, it is cheaper to fly now than it was in 1978 when adjusted for inflation. Carriers like Frontier and Spirit have brought innovation to the industry by unbundling fares, but even flying to Hawaii today on a network carrier is cheaper than it was in 1975 (sometimes even in absolute terms, not just inflation-adjusted dollars).
Separately, the Spirit Airlines today is not the Sprit Airlines of a decade ago. Back then, I’d argue the business model was based up bait and switch. Entice passengers, still accustomed to being able to check bags for free and bring the kitchen sink onbaord, to book cheap tickets only to shock them during check-in with baggage fees that were higher than the ticket itself.
That may not have been the explicit goal, but I have argued before (and indeed, served as an expert witness against Spirit Airlines in a lawsuit over such carry-on fees) that Spirit Airlines was woefully irresponsible in disclosing such fees, particularly when its tickets were sold via online travel agencies.
Btu that is no longer the case. The Spirit business model has permeated the industry and Spirit now clearly discloses its unbundled approach to selling air travel. There are no more surprises when flying Spirit Airlines.
Is Spirit leading a race to the bottom? I don’t think so. Spirit is offering a product that has democratized air travel (hence our frequent stories on passengers misbehaving when flying Spirit) and I think that is a great thing. Meanwhile, think about how seats have evolved on network carriers over the last-decade. While we can debate how the quality of food has declined, there is no disputing that the hard product, i.e. the seat, has never been better in business and first class. Carriers are innovating and from no-frills to luxury, there is a great range of products avaible that have allowed more Americans than ever before to fly.
CONCLUSION
There are inherent problems in the system, but the system is not broken. Therefore, it is true that regulation is necessary to prevent a true race to the bottom in which safety is compromised, but I simply do not see the sort of “ruinous” competition that Longman laments. On the contrary, I see an industry that may be largely susceptible to outside events like pandemics and wars, but is actually working fairly well.
You miss the point: “the seat, has never been better in business and first class.” The vast majority of flyers sit in the back, not the front. The seat in the back has never been worse: less padding, less recline, less width and less legroom.
Travel blogs do not cater to economy class flyers
These sites cater to premium cabin customers
The seat pitch, padding, and overall spaciousness and privacy in domestic first has also declined dramatically.
But with perks like screens, plugs, streaming entertainment, and wi-fi it has never been easier to pass time whilst onboard.
“But with perks like screens, plugs, streaming entertainment, and wi-fi it has never been easier to pass time whilst onboard.”
That’s hardly a consolation when the guy in front of you has reclined into your lap and the gal next to you has a robust girth, infringing on your personal space. Spirit isn’t eading the race to the bottom. Spirit has won the race to the bottom.
I don’t know much about the US market, but I can tell you for a fact that business class within Europe is substantially cheaper in inflation-adjusted terms than Y had been before deregulation [in 1992]. Now, of course, one might say that the seats still aren’t very good at all, but the flights tend to be quite short and the overall product (including, but not limited to, lounges) is massively better than the economy class of 30 years ago.
This.
In far more polite words than my rant below. LOL
“…., but is actually working fairly well.”
Spirit and Frontier are financial basket cases. God knows how Breeze is truly doing for its financials are not fully disclosed. Not sure about Allegiant, but not for me. Also, each of the big four show a “bare” fare for most every flight which is sucking away PAXs who appreciate consistently and frequently.
The ULCCs need to revise their battle plans or hire the Europeans to run the show. The current business model contains major faults.
There is something to be said for Spirit leading an industry trend for people to reduce their literal baggage when traveling. Did we really need to pack a blow dryer, 3 sweaters, and 4 pants for a 4 day trip? So people learned to be more economical when flying and that’s not a bad thing. On the other hand, “gate lice” has proliferated as people became more stressed out when traveling because checking a bag was no longer the default. When people check bags, boarding is quicker. There”s less issues with going through security. You don’t have to fight for overhead space. And so on.
I was just thinking it would be neat if some airline executive who gets millions per year for golfing with his college roommate to perhaps consider free check in bags for SMALLER bags. Say, the size of a current carry on. People can pack their liquids and such into it, it wouldn’t weigh as much, and people could board the plane faster. Nobody would fret about the fight whether one’s “personal item” will be charged a fee or hold up the security line.
The facility to check in carry-ons for free is very widespread- no need for anyone to reinvent the wheel. I do it every single time I fly SN, and I recently also did it with Aerolíneas Argentinas. Aegean offer it on all their flights, too- as long as you don’t have the very cheapest fare which only allows a ‘personal item’ instead. I have also read that BA have recently started to offer it on their LCY flights.
Basically, ever since I managed to get an ultralight laptop, I never take the full rollaboard with me on short haul flights- that way I can board last, maximising lounge time and eliminating the risk of queuing and/or arguing abou priority boarding.
I was (mostly) with you until this — “…there is no disputing that the hard product, i.e. the seat, has never been better in business and first class.”
Seriously?
What % of seats on US carriers is “business and first” class? How many people fly the “upper class”, away from the dirty, unwashed peons in the back of the bus?
You speak of democratization of air travel and this nugget (turd?) In the same breath. Cognitive dissonance or an uppity, bratty sense of entitlement. “I got mine, the ** with you”.
Redact this, right away.
If you want restrictively high ticket prices, than regulate the airlines again.
I also thought that the Atlantic article was seriously flawed, and the type of regulation you had in the USA prior to 1978 was much more onerous than we had in Europe.
One issue that Longman failed to raise was the much wider prevalence of LCCs in Europe and the fact that the larger carriers make decent money. They’re also major operators in Asia (https://www.advito.com/resources/the-surge-of-low-cost-carriers-in-asia/), but I don’t know how financially healthy those carriers are.
I fly Spirit. The seats do not recline, they have the smallest distance between seats, no inflight entertainment although they started to sell WiFi. My go bag fits under the seat with compact laptop. I am 5’10 (177cm) but doubt anyone over 6’2″ can fit. I will fly Spirit on 3 hr flight and less all the time.
Flying is safer and cheaper than it’s ever been in history. The system needs ongoing tweaks to protect consumers but it’s been wildly successful so far.
People who miss CAB hate the poor despite claiming to be advocates for “flyover country.”