Yesterday, United States Senator Elizabeth Warren sent a letter to the United States Secretary of Transportation asking the Department of Transportation (DOT) to address her serious concerns about consolidation in the airline industry. Specifically, the letter cited problems with the JetBlue-Spirit merger.
DOT Authority
Senator Warren opened his letter and got straight to the point, citing the DOT’s history of protecting competition in the airline industry, or lack thereof. This may interest you : Don’t Let Your Pandemic Travel Credits Go to Waste.
“The DOT has significant and historically underutilized anticompetitive powers in the domestic air travel market to ensure that all route transfers are “in the public interest,” and I urge you to consider using these powers as you continue your laudable efforts to protect consumers . ”
The laudable consumer protection efforts Sen. Warren mentions are the DOT’s efforts to create a dashboard that tells passengers what they are entitled to in the event of a delay or cancellation when the airline is at fault. The dashboard launched over the Labor Day weekend, and all of American Airlines’ major policies are listed on the website.
United States of America “Title 49 expressly gives the DOT the authority to block any transfer of a route management certificate if such transfer would not be ‘consistent with the public interest.'” The article states all that the Department of Transportation must assess when it comes to when it is about whether such a transfer would not be ‘in accordance with the public interest’. evaluating it, one of them is the effects of “competition in the domestic airline industry”. Although it has the authority to block such actions, in the past the DOT has interpreted it as only having the power to block international route transfers.
Spirit shareholders will vote on the merger in the coming weeks. . Photo: Lukas Souza | Simple Flying
According to Senator Warren, DOT’s previous interpretations are incorrect, and she states that the article refers to domestic and foreign route approvals. The language of the article is “certificate(s) of public convenience and necessity.” It goes on to state that transfers involving international routes are “consistent with public convenience and necessity,” a separate requirement. DOT’s block transfer power applies to domestic and international routes.
DOT must also analyze whether an action will prevent “anti-competitive practices” and avoid monopoly and market dominance. Also extremely important, the DOT must ensure that any carrier cannot drastically raise prices relative to the competition. The senator continues by stating that just because the DOT has not acted to the full extent of its authority in the past does not mean that it cannot change in the future. Warren writes, “…but you are not bound by that misinterpretation.”
Will JetBlue and Spirit airlines be prevented from joining?
All of the above is just preparation for Senator Warren’s main argument: “The JetBlue-Spirit deal is likely to reduce airline competition and harm the public.” According to the Senator, there is “overwhelming evidence” that another major airline merger would harm American consumers. This may interest you : Business travel is making a comeback, but it looks different. Today, four major airlines control 80% of the market. These airlines are sometimes referred to as the “Big Four,” which includes American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines.
The 80% market share held by the four airlines is greater than at any time in the history of modern commercial aviation, but according to Senator, this dominance was not achieved by offering better service at lower prices. Instead, the airlines reduced the quality of service and increased the fares. Delta bought Northwest in 2008, United bought Continental in 2010, and American merged with US Airways in 2013.
“This increased consolidation has contributed to the increase in delays, cancellations and forced rebookings that airline passengers face today. Consumer complaints to the DOT are up more than 300 percent from pre-pandemic levels, and airline ticket prices have outpaced inflation.”
Adding another major merger to commercial aviation in the United States poses a “threat to consumers” because the two airlines have different business models and target different customers. Spirit is an ultra-low-cost carrier (ULCC), while JetBlue competes more directly with older, higher-cost carriers. Senator Warren believes that a merger of the two airlines would take the ghost out of the ULCC market, leaving Frontier to dominate that market, which would be disastrous for consumers.
Spirit’s analysis of the merger agreement has the airline changing its mind. Photo: Vincenzo Pace | Simple Flying
Senator Warren cites a study entitled “The Emergence and Effects of the Ultra-Low Cost Carrier (ULCC) Business Model in the US Airline Industry,” which found that airfares when ULCCs enter an existing route market drop by 21%. The Spirit-JetBlue merger poses a threat to the airline industry and will be a significant detriment to consumers. There are multiple airports where the two airlines have bases and numerous airports where both airlines operate the same routes, including some airports where, if the two merged, they would control more than 50% of the market share.
To further bolster Sen. Warren’s point, Spirit’s analysis presented to its shareholders when it tried to prevent a hostile JetBlue merger said that “a JetBlue transaction would significantly raise prices for consumers.” Spirit also stated, “JetBlue is a high-cost airline that is trying to buy a low-cost airline and raise fares. This assessment shows that the merger of the two airlines does not favor competition in the airline market.
Additional factors
The damage to customers doesn’t stop at higher fares, Warren notes. An analysis of numerous operational metrics shows that Spirit is the worst airline in the United States. It often has the highest cancellation rate and lowest on-time performance. Read also : As the end of summer travel, the United States Large Company Unit Revenue Challenge. The airline’s operational safety has also been questioned, as Spirit only has 28′ seats in its cabins. The Federal Aviation Administration (FAA) is now investigating the safety of little or no bank and how it can prevent the safe evacuation of an aircraft in an emergency.
What do you think of Senator Warren’s thoughts? Should the DOT obstruct and block the JetBlue-Spirit merger? Let us know in the comments below.
