Across the Anglosphere, the airline industry is falling apart.
The Federal Aviation Administration has grounded Boeing 737 Max 9 planes after an emergency exit door blew off an Alaska Airlines aircraft midflight. That led United Airlines to forecast a first-quarter loss as it grounds 79 of the planes in its fleet. And a New York-bound Virgin Atlantic flight was canceled when a British traveler noticed the plane’s wing was missing a whopping four screws. Shortly after a New York Times investigation of NASA data found that near-collisions of commercial airplanes have more than doubled over the past decade, the FAA announced an investigation into exhaustion among air traffic controllers, who posted a 65% increase in “significant” errors from fiscal 2022 to 2023.
On the business side, despite JetBlue controlling only 5.5% of the U.S. airline market share and Spirit Airlines another 4.9%, a federal judge has blocked a proposed merger between the two. That ironically would likely lead the latter to file for bankruptcy should the merger appeal prove unsuccessful.
And yet, the real big business of the Big Four — American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines — is booming. Airline loyalty programs, once frequent flyer tallies that rewarded points based on how frequently a consumer flew, have evolved into effectively being credit card companies. And these loyalty programs have become more profitable for some airlines than their actual flights.
Starting this year, the frequent flyer programs of the Big Four no longer reward consumers for how frequently or how far they fly but rather for how much they spend, either on flights or on the airline-branded credit cards. Delta faced customer fury when it announced the radical change to its SkyMiles to reward cash spent over actual airline travel, forcing the company to slow walk and (barely) walk back the transition. Considering that Delta estimates a full 1% of U.S. GDP is spent on its credit cards, joining American Airlines’s AAdvantage and United’s MileagePlus programs is a gamble.
But considering that the Big Four combined control about 70% of the airline market, it’s not too much of a gamble, if only because of the monopolistic power of specific airlines over specific airports. According to an Associated Press analysis from 2015, a single airline controlled the majority of the seats sold at 40 of the nation’s largest 100 airports, and one or two airlines controlled a majority of seats at nearly all of them. The opportunity cost of relinquishing loyalty to an airline is thus heightened for frequent flyers served by a monopolistic airport.
For example, I live just two Metro stops from the Ronald Reagan Washington National Airport, which is legally barred from expanding its number of flights or hosting flights longer than 1,250 miles without express congressional approval. Although a bipartisan push has tried to relax these restrictions, American Airlines, the dominant airline of DCA, has lobbied heavily to oppose the measure. This means that for at least another year, my husband and I will be incentivized to keep our American Airlines loyalty and credit card.
It’s not all bad. Loyalty points confer status, which results in free upgrades to premium economy and first class, as well as access to lounges, free checked baggage, and the occasional VIP assistance during SOS moments.
But it’s not lost on frequent flyers that airlines have asked for more of our cash while delivering a lesser product.
The quality of the airline experience has never quite rebounded since the COVID-19 pandemic. Despite the $54 billion taxpayer bailouts gifted by Congress to the airline industry during the COVID-19 spending spree, airline ticket prices are up 21% since President Joe Biden took office, even higher than a 17% increase in the generalized consumer price index. Meanwhile, the product has gotten worse. While airline cancelations outright fell modestly in 2023 to 1.2%, on par with 2016, airline delays hit their highest rate in a decade, according to an analysis by LendingTree, which found barely three-quarters of domestic flights arriving on time in the first half of 2023.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
And anecdotally, “social distancing” policies have become the norm among flight staff. First-class passengers can consider themselves lucky if airlines actually serve them the free meals they advertise as perks of their upgrade, and I’ve seen flight attendants cancel cabin service for mere beverages in coach during shorter haul flights. During one flight I had in an American Main Cabin Extra seat, the armrest was held together by tape, and the staff was evidently on their union break, denying me the privilege of the free, bottom barrel glass of Cabernet that theoretically came with my seat.
Wall Street analysts value major airline loyalty programs more highly than their actual flights, and perhaps for good reason. The Big Four don’t have to offer more flights, cheaper flights, more reliable flights, or even more pleasant ones under the credit card scheme, and they’ll still widen their profits so long as consumers continue to chase the chance of free upgrades and preflight champagne with credit card spending.
