AYESHA RASCOE, HOST:
It's been a turbulent time for airlines around the world. Jet fuel supplies are dwindling as the U.S.-Iran war continues, and the Strait of Hormuz - a key supply route - remains effectively closed. And travelers are feeling it from higher priced tickets and baggage fees to cut flight routes ahead of the busy summer travel season. Bill McGee is the senior fellow for aviation and travel at the American Economic Liberties Project. He joins me now. Good morning.
BILL MCGEE: Good morning. Thanks for having me on.
RASCOE: So let's start with the big picture, the global analysis. Like, just how much trouble are airlines in?
MCGEE: Well, in this country, they're in tremendous trouble. This speaks to the systemic problems with the industry that, believe it or not, date back almost 50 years to the Airline Degulation Act of 1978. Since then, we've seen over 200 bankruptcy filings for U.S. airlines. We have the smallest airline industry in terms of consolidation that we've had in a hundred years. We're down to about 11 airlines now. We still see more mergers and more bankruptcies on the horizon. The industry is broken, and the K-shaped economy we keep hearing about, it's really present in the airlines. It's probably the poster child for it. And by that, I mean, the four biggest airlines - American, Delta, Southwest and United - they are making more money than they've ever made. On the other hand, all the other smaller airlines, almost without exception, are actually losing money, or they're just barely trying to tread. And in some cases, it's quite serious.
RASCOE: Low-cost airlines like Spirit and Frontier, they met with the transportation secretary last week to seek temporary tax relief to offset the high price of jet fuel. Do you think Congress would go for that?
MCGEE: I think they should seriously consider it. We don't want to see the low-fare airlines like Spirit, Allegiant, Frontier, et cetera, we don't want to see them go out of business. What a lot of people don't realize is, you don't have to fly on them to benefit from their presence. If you're flying on a route where there is a low-fare airline, even if you're on one of the big three - American, Delta, United - you're benefiting because your fare is lower because of them.
On the other hand, what we see with the big airlines is they have never let a crisis go to waste. And I say that about 9/11, about the Great Recession, about COVID. And so what that means is they're putting in fare increases and fee increases due to the situation with oil in Iran. However, the CEO of Delta was asked, if the price of oil comes down, will the fares go down? And he basically said - I'm paraphrasing - we hope not.
RASCOE: The CEO, he, quotes, wants to "retain any pricing strength" gained during the energy crisis. Can you talk about, like, also how baggage fees have gone up? Like, what's the logic behind that?
MCGEE: Yeah. So, you know, there's two ways that they can, you know, raise the cost of travel. One is through fees, and one is through fares. So far, they have been relying heavily on fees. It now costs you $45 for your first checked bag on the six largest airlines in the country. When people are shopping for fares online, they look at the base fares. They don't always consider the price of the fees. So they know that they can sort of go in through the back door with a fare increase by raising the fees first.
RASCOE: In other airline news, there is talk of a possible merger between United and American Airlines. It was dismissed by American's CEO, but, you know, talk like that does bubble up from time to time. Does it seem likely to you that you could see a merger between the big airlines, not the low-cost ones, and how would that change the industry?
MCGEE: Well, I certainly hope not. The proposal from United to merge with American is absurd on the face. Just about everyone just sort of either laughed or shrugged and said, you've got to be kidding. We're talking about one airline in this country controlling 35- to 40% of all flights. However, there is a school of thought that says that United asked for the moon. They said, let's ask to merge with American, the biggest merger of all time, knowing that it wouldn't pass muster. Even President Trump said he was not in favor of it.
But the next merger that's proposed, I think, will be much more serious. Maybe it's United and JetBlue. Who knows? But by asking for something that seemed outrageous, I think the second ask will look like, in context, a little more reasonable. The Trump administration, in recent months - both the Department of Justice and the Department of Transportation - have been sending out signals that they are open to more mergers. In fact, the DOT Secretary Sean Duffy said just that two weeks ago on CNBC. He said there's room for more mergers in the airline industry. The fact is, we don't need any more mergers. They have harmed competition. They have harmed pricing. They have harmed entire communities and regions across the country.
RASCOE: That's Bill McGee, senior fellow at the American Economic and Liberties Project. Thank you so much for joining us.
MCGEE: Thank you. Transcript provided by NPR, Copyright NPR.
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