Shady Airlines

Last summer I went to study abroad in Italy, and by far my biggest expense was my plane ticket. At the time it made sense for the price to be high because of high gas prices. However, in the last few months the price of oil has dropped significantly, but the price of a plane ticket has increased. Several factors that I will discuss lead me to think that the Airplane industry is possibly a monopoly, and is inhibiting economic expansion in the tourism industry.

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When most companies produce a bad product or demand a recall on a good they should see a drop in demand and therefore lower their price to accommodate. Why doesn’t that apply to airlines? “There have been 761 deaths in 12 commercial aviation accidents in 2014, according to the Aviation Safety Network, one of several organizations that tracks these statistics. Its data — spanning 1946 to the present — include hijackings, sabotage and shoot downs” (CNN). There have been more plane crashes in 2015 and one just recently in Germany last week. People have to be concerned about their safety when purchasing a ticket. After 9/11 people were worried about terrorism, but now they should be worried about a whole array of issues. Even with this surge in danger the big plane companies are seeing a surge in profit. “Airlines’ profits have been taking off this year, and the industry doesn’t seem inclined to change that flight path. The big carriers announced a $4 per ticket price increase Tuesday, even as falling jet fuel prices were delivering an unbudgeted bonus” (Time).   A more dangerous product should decrease airfares, but the short supply domestically is keeping the prices down.

 

Regardless of the increased danger in skies, there should be a drop in airfare due to the drop in oil.   A barrel of oil has dropped significantly from around $100 a barrel to $48 a barrel. That huge shift should give the airlines a option to lower their prices, and help the consumer. However, the luxury and the sexiness of the skies is long but gone, and has been replaced with new executives that are running a cut throat business. So cut throat that I believe they are not only setting prices but inhibiting other airlines from entering the market domestically and globally. “A swelling group of U.S. airports, tourism interests, consumer advocates and cargo carriers have complained that the big U.S. airlines are being protectionist, trying to undermine the U.S. “open skies” policy that has deregulated a wide swath of international travel, created new jobs and given consumers more choice and lower fares” (WSJ). So how are they creating barriers to enter, and fixing prices in a market with lower inputs and more plane crashes? The answer for most shady thing in this country, lobbying.

 

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The answer might be solved when you see how much money airlines use for lobbying. According to Open Secret they big airlines gave out more than 80 million to the disposal over 633 lobbies in Washington DC. As I’m writing this I admit it sounds like a conspiracy theory but the graph appear to show some correlation. For example, in 2011 Southwest Airlines had an international flight in Yemen crash. In 2010 they paid only $610,00 to lobby in Washington even though that was the highest lobbying year in the last ten years. In 2011 they paid $1,020,00 even when the total amount of money lobbied by all of the airlines in 2011 dropped by nearly ten million (Open Secrets). This could just be a coincidence, but with further investigation could be an alarming trend that airlines are paying for crashes through lobbying money.

 

I started this blog post with a simply question. Why are airplane tickets so god dam expensive even thought more planes are crashing globally? Through limited research some shady answers have arisen, and it seems like airlines are one of the most protected industries in America. They are fixing prices, stopping companies from entering, and paying off the government for their crashes.

3 thoughts on “Shady Airlines

  1. Nate McCrumb

    Very interesting post. I think there needs to be a major overhaul in airline operations. The amount of deaths we have seen as a result of airline crashes in the past year is astonishing. After the recent crash in the Alps, I think we need to see a more exhaustive and strict review of pilot health, both mentally and physically. It is just another variable in a large scheme that leaves many people uneasy when traveling.

  2. Chris Pedersen

    As I understand it with the cost of oil being the largest operating cost for airlines it is an industry prices to hedge against oil. This means that they aren’t actually experience as much of the drop in oil prices as they would have if they hadn’t hedged.

  3. Jake Weimar

    Airlines operate as monopolies because of the hub system. For example Delta almost completely controls Detroit Metro Airport and can price discriminate because of this. Which is why South West can be seen as such a discount airline

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