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Low-cost airlines help keep airfares from rising too high

  • Blog Post by: Tim Harlow
  • January 20, 2014 - 12:53 PM

Low-cost airlines are gaining a bigger share of the air travel market and also are helping keep airfares in check, a new report out last week has found.

In the past five years, the number of travelers choosing airlines such as Spirit, Southwest and AirTran (all three serve the Twin Cities) has grown 15 percent and now account for 30 percent of domestic travelers according to "Aviation Perspectives: The Impact of Mega-Mergers, A New Foundation for the U.S. Airline Industry" report by PricewaterhouseCoopers.

The report also said the low-cost airlines have made inroads into more domestic markets and in turn have kept airfares from rising from 2008 to 2013.

"Average increases in U.S. domestic airfares continue to lag behind major cost drivers, as fare increases since 2004 have been quite modest, rising at approximately two percent on an annual basis," said Jonathan Kletzel of PricewaterhouseCoopers. "The fourth and likely last airline mega-merger in the U.S. was recently approved (US Airways and American), and while this certainly is a historic level of consolidation, there remain other sizeable airlines serving the U.S. domestic market, pushing companies to look for new ways to remain competitive."

Low-cost carriers are likely to benefit even more from the consolidation of American and US Airways because they stand to gain 170 slots at some of the nation's biggest airports in markets such as Chicago, Miami, New York, Boston and Washington D.C.

While branded as low cost carriers, the report found those fares on those airlines are increasing and are "more closely matching those of network carriers." The report attributed that to older equipment with higher maintenance costs and an aging workforce that increases labor costs.

Other findings of the report:

  • The number of arrival delays fell 17 percent and the number of flights departing late was down 8 percent.
  • The number of flight that were canceled fell by 26 percent from 2008 to 2013.
  • Carriers reported a 31 percent improvement in baggage handling, dropping from 4.6 incidents per 1,000 passengers in 2008 to 3.2 reported incidents in the third quarter of 2013.
  • With fewer takeoffs and landings, congestion has improved at many of the nation's busiest airports cutting down on delays and allowing airlines to recover more quickly from disruptions.

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