Airline's fares are higher when it's not competing with a low-cost carrier.
Fares out of Minneapolis-St. Paul International Airport featuring competition between Delta Air Lines and low-cost carriers have been 27 percent less expensive than those on Delta-only routes, according to a new study.
The analysis, commissioned by the Metropolitan Airports Commission, looked at the impact of low-cost airlines on ticket prices at MSP and at the effect of competition between Delta and other major carriers.
Routes with competition between Delta, the airport's dominant carrier, and any of four low-cost airlines resulted in passengers saving an average of $59 one way, the study found. A less dramatic discount occurred when Delta faced competition from other major airlines.
The analysis, done by MAC staff and a consultant, showed that domestic routes served only by Delta had an average one-way price of $218. Fares for routes with competition between Delta and one or more major carriers -- but not any low-cost carriers -- averaged $200.
Fares that involved Delta and a low-cost carrier -- and sometimes also another major carrier -- cost $159.
MAC chairman Dan Boivin said attracting more airlines is "a big priority for this commission. We understand [it] will hopefully drive down fares."
But airport officials offer little reason to expect progress soon in attracting cheaper flights. And some said attempts to curb Delta's dominance would likely face legal or regulatory challenges and not necessarily lead to lower prices.
MAC general counsel Thomas Anderson said curtailing gates would probably violate the 1978 federal order on airline deregulation by interfering with market forces. "There's a broad pre-emption of state and local regulation of airline rates, routes or services," he said.
Delta dominates gates
Delta controls 89 percent of the gates in the main Terminal 1, which it shares with other major legacy carriers, such as United. Even when including the gates held by low-cost carriers such as Southwest at Terminal 2, the Humphrey Terminal, Delta controls slightly more than 80 percent of the airport's gates.
The MAC cites that dominance as a factor contributing to higher fares at Minneapolis-St. Paul International than at many other major airports. MSP ranked as the 11th most expensive in average domestic fares for round-trip or one-way flights earlier this year, according to U.S. Bureau of Transportation Statistics.
At Denver International Airport, United is the single biggest carrier but controls only 43 percent of the gates. Southwest and fellow low-cost carrier Frontier together hold 37 percent. Denver ranked 77th in fares.
"We're trying to avoid ... a dominant carrier," said Lacey Barron, a spokeswoman for the Denver airport. She said the competition "definitely keeps that balance of fares down here."
Delta is also less dominant in its headquarters city of Atlanta than at MSP. Low-cost carriers have a bigger share of traffic in Atlanta than at MSP. Atlanta International Airport's fares ranked 45th.
Delta inherited the airport dominance of Eagan-based Northwest Airlines when the two merged several years ago. The MAC has extended Delta's control over its MSP gates to 2020.
The MAC doesn't have a formal selection process for assigning gates. It says Delta retained them because other airlines have not demanded to expand in the main terminal.
"If ... multiple airlines desired a single gate or we had fewer gates available than the airlines were requesting on a long-term basis, MAC would establish a formal selection process," said Brian Peters, an airport official in charge of attracting more airlines. "It's not as though carriers are knocking on the gate and we're saying no."
But Art Rolnick, a senior fellow at the Humphrey School of Public Affairs who is an advocate of limiting the number of gates assigned to any one carrier at MSP, said the arrangement creates "a chicken and egg problem. They're not coming in because ... they knew it was tough to compete."
Delta declined to comment about the gate restriction idea, calling it "something that is speculative right now."
The analysis said factors besides competition contributed to MSP's high price ranking. Those included community affluence and the large number of corporate headquarters in the area whose employees need to travel.
Another factor is a lack of nearby airports. While Delta holds about the same share of gates at the Detroit airport as at MSP, low-cost carriers at airports in Flint, Lansing and Grand Rapids offer alternatives that restrain fares in Detroit.
The MAC's effort to increase competition focuses primarily on wooing potential newcomers at trade shows.
The MAC's Anderson said the ranking of MSP fares by the Bureau of Transportation Statistics partly reflects that, "We have choices other communities don't have. People are choosing to fly nonstop and are willing to pay a premium to do that."
But those choices can come at a price.
"The people in the Twin Cities who are really hurt by this are the people who use the airlines two or three times a year to visit family, go on vacation,'' said University of Minnesota economics Prof. Timothy Kehoe. "They would prefer to pay a little bit less and make a connection if they have to."
Pat Doyle • 612-673-4504