Guam’s delegate to Congress has threatened “Congressional intervention” over the high fares between the US mainland and Guam on United Airlines, particularly in light of Typhoon Mawar.
Guam Delegate Threatens “Congressional Intervention” Over High Fares On United Airlines
James C. Moylan, who represents Guam as a non-voting delegate to the US House of Representatives, sent a note to United Airlines CEO Scott Kirby, complaining about high fares to Guam.
I am writing this letter to express my concerns about the absurd costs for one to travel to and from Guam, especially as we face the aftermath of a major natural disaster in Guam which will surely impact our economic activity in an adverse manner over the coming weeks and months. There are many islands residents residing on the mainland who would like to visit home to assist their elderly, but basic economy seats estimate between $4K to $5K if you are traveling in the next few weeks, with premium seats exceeding $7K.
In looking at last-minute fares, I do see fares are high to Guam…though they don’t appear to be quite as high as the Congressman warned, though routings with the shortest connections are quite pricey:
Moylan continues:
While I was looking for a flight home, Prices on economy and premium literally ranged from $5K to $11K. I was able to find a flight at a little over $5K which would still foie me to overnight in Houston, which means an additional cost in securing a hotel. A news outlet in Hawaii even a ran a story on the costs to travel Guam after the storm passed, and questioned if price gouging is even taking place. In 2022, a mainland flight could cost around $2,500 from Guam, and now these seats exceed $3K (look at the costs in July). We need some answers because these types of fares will certainly warrant some congressional intervention, and a review from the Guam Attorney General. I do want to note that United Airlines does have a monopoly on the Guam to mainland market.
And there goes my sympathy for the Congressman. Flights are expensive because folks are trying to return to Guam to care for loved ones. Rather than United price gouging, the more likely explanation is that all of the cheap fare buckets are sold out and the flights–whether via Honolulu or Tokyo–are quite full.
Last I checked, United Airlines is not in the charity business (that is only US taxpayers who bailed out United and others during the pandemic and received virtually nothing in return…)
United has a monopoly on Guam routes not by government fiat but because no other carrier has chosen to compete with United. Specifically, Delta Air Lines has abandoned its Guam flights leaving United as the sole operator.
Frankly, I’m not even sure United makes money on its Guam operations, but it certainly does serve as a lifeline to that region of the world.
Subsidizing fares does not strike me as a rational approach to serving Guam. But Moylan wants “compassion” from United:
While I am certain that demand and supply factors impact the fares, United Airlines to show some compassion…Island residents should not be penalized with abused costs to travel to and from Guam which is exactly what is taking place. It is literally more cost effective for one to travel to Europe from teh mainland, than to the US territory of Guam…
Yes, that again is supply and demand. Competition is fierce on European routes and the distance of a flight has never correlated to their price.
You can view Moylan’s full letter below:
CONCLUSION
Moyland wants to “find some solutions” but it seems to me the only “solution” he can offer is to subsidize fares for local residents, which will only further distort the balance between supply and demand.
Guam is a tricky case. Fares are high. But asking United to lower the costs of seats when flights are going out full seems to be a fool’s errand. Setting a price ceiling on this route will only make the situation worse.
Moylan can’t use the GSA FY23 contract fare? Really?
Transpacific flights’ prices are just outrageous. Pre-pandemic it was around $600-$800 and $1000 in the peak seasons.
Isn’t it just supply and demand? Airlines will add flights and demand will wane eventually.
The free market didn’t work that well in 2008. The federal government had to save the banking system from its excesses.
Not necessarily. Plain supply and demand curves in a traditional market suggest that prices to Asia should have dropped during covid due to low demand- quarantine/travel restrictions means that airlines would lower prices to encourage demand. This is what we initially saw when the pandemic first hit in March 2020. This was quickly changed as the airlines and consumers realized that this wasn’t a traditional market sense, but rather a more artificial strain. Two things played at hand with airlines needing to raise prices to maximize profits and they also realized that the ones traveling were desperate and were forced to travel, so they raised prices to the extreme and this breaks basic supply and demand that all of us know about.
Then, after the pandemic with Asia bar China lifting restrictions, simple supply and demand curves suggest that airlines should eventually lower prices in order to maintain a steady demand. These airlines have mostly lowered prices to pre-covid prices that start off in Asia. However, they are not doing so for trans-pacific flights starting in NA, and these consumers in NA who follow their own rational choice are starting to fly the other way across the world even if it takes longer because it is much cheaper. This will take some time, but will eventually cause the market to finally rebalance and go back to basic values and cause a shift. But by that point, it will be relatively too late for the airline unless there are favorable market conditions in other sectors that make up in profit.
Guam has always been the most expensive ticket in Asia. No way you were ever getting sub $1000 tickets. Certainly once in a blue moon United may had a cheap ticket for a day. I’m surprise United hasn’t launch sfo-gum service. Seems like they could load that with cargo.
yet I was able to get a P fare for July at only 4200, cheaper than anything in Asia.
I did see some 3700 P fares a couple of days before
This isn’t the first time we’ve heard this. I feel like this comes up every few years. It’s a shame that getting to Guam is so expensive because it’s a pretty nice place.
Hawaiian Airlines doesn’t serve Guam which should tell you what the financials look like on that route. You know they’d be launching HNL-GUM if there was even a shred of profitability there. United may service Guam via HNL as. way to shuttle spare parts to support their micronesia network and not necessarily a highly profitable route.
Cabotage!
I love how on a “fact finding” message where is asking for some help and answers from a private company that he then accuses them of wrongdoing and already has “his answers”. This is all for publicity. Ridiculous.
In fact high fares were initially displayed on the United website, something that has since been fixed.
https://www.guampdn.com/news/united-explains-why-high-fares-were-displayed-on-website/article_bdb0d7b6-fea1-11ed-b075-bfdfb156ad86.html
How about United just exit the market and then no airline is there to serve it?
It happened to American Samoa. Hawaiian suspended for a while and USDOT suspended cabotage restrictions so foreign airlines can sell AS-US tickets. There are few airlines serving PPG, but plenty around GUM and United isn’t going to give up this cash cow. And USPS contracts.
“United has a monopoly on Guam routes not by government fiat”
Isn’t there something to this though?
Korean flies from the West Coast to Seoul obviously, and from Seoul to Guam, but they say you can’t book a flight on Korean going SFO-ICN-GUM because US DOT regulations do not permit travel to Guam from the mainland US via a third country.
So there is some governmental interference that is limiting the free market here, right?
Interestingly at present, from certain parts of the US, round trip flights to Guam on United can be had for $3400 in first class on United. So maybe the answer to all of this is some positioning legs.
Conservative travel bloggers always chide air travel as being a rent seeking industry demanding excessive government protection, but then when noncompetive fares and practices exist pretend that airlines exist in a competitive free market. Some consistency would be nice.
It wouldn’t matter either way. A monopoly that comes into existence by free-market principles such as barrier to entry is still a market inefficiency that can be corrected, in the view of almost every mainstream economist. And it’s quite plain that UA has a monopoly on US-Guam routes.
First, don’t make assumptions.
Second, who are you to determine what is competitive and what is not, especially when flights are selling out?
Third, what barriers of entry do you refer to? Nothing is stopping any entrant to the market. Delta gave it a good try…and fell short.
My fear is more flights to the island could cause it to tip over and capsize.
Why on earth do you think flying to asia in order to get to Guan is a feasible option? this should be a 100% domestic flight that shouldn’t require a stopover in a foreign country lol. Most people are going to book direct or one-stop via hawaii. Try to look for flights and tickets like a normal person instead of through the eyes of a travel snob.
“Flights are expensive because folks are trying to return to Guam to care for loved ones. Rather than United price gouging” Masks are expensive because folks are trying not to catch covid. Rather than suppliers price gouging. United is the sole operator. They can price it however they want.
“all of the cheap fare buckets are sold out ” as if these fare buckets are natural resources that once used up on a flight can’t be replenished.
And enough with this free market musing. Jones act ensures that costs of goods in Guam is elevated, which surely affects the logistics of running a hub there. And Cabotage should be allowed for US territories that lack US-based services.
Uhhhh….what US territories lack US-based services?
United has a monopoly on Guam flights because:
1) Federal aviation cabotage laws that prevent, for example, Philippine Airlines selling tickets for USA mainland/Honolulu to Guam to Manila.
2) Delta pulled out of Guam and all of the Pacific islands not long after inking a deal with the communist Chinese-owned China Eastern. Delta even had a local credit card that was, notably, issued by a bank run, at the time, by Guam’s now-Democrat governor.
3) United makes a lot of money on Guam and Micronesia flights, not least because of cargo like USPS.
I always get a kick out of the puffery of the meaningless non-voting “delegates” to Congress.
Whatshername from the District of Columbia is particularly entertaining.
I don’t understand why Hawaiian isn’t the number one airline to Guam, seeing as how the vast majority of people flying HNL-GUM are either military or low-yield leisure travelers.
Oh, right. Because it’s frightfully expensive to serve the route and the only reason UA is there is to anchor the Air Micronesia service and serve the Japanese vacation market.
Seeing that the military runs its “Patriot Express” flights regularly to ferry its members who are on orders on and off island rather than pay the outrageous airfares for their folks to fly a US airline back and forth to the mainland speaks volumes. I understand these flights have been in place for years (prior military on Guam) however, not to this extent. If the US government isn’t prepared to fully utilize United due to cost, then there is something going on that needs to to be addressed so the local people and those of us visiting family on island. We talk about loss for the company on the route, if Unite lowered the fares to Guam even by a few hundred many of us could afford to go back more often… demand would increase. And please, if United is going to charge outrageous prices at least serve a meal and not the crackers we get for 15 hours!