Hearings to examine competition in America's skies.

Antitrust, Business Rights and Competition

2025-09-30

Source: Congress.gov

Summary

This hearing gathered insights on the state of competition within the airline industry, highlighting concerns about market consolidation, rising costs for consumers, and challenges faced by smaller carriers. Participants discussed the impact of deregulation, the role of ancillary fees and loyalty programs, and proposed solutions to foster a more competitive and passenger-friendly air travel environment.[ 00:26:45-00:27:30 ]

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[ 00:33:22-00:33:32 ]

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[ 00:32:33-00:32:36 ]

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Themes

Airline Industry Consolidation and its Impact

The airline industry has experienced significant consolidation since deregulation in 1978, with just four major carriers now controlling over 80% of domestic air travel.[ 00:26:45-00:27:31 ]

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 This concentration has led to a perceived reduction in competition, higher fares, and fewer choices for consumers.[ 00:28:26-00:28:34 ]

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 The merger trend has created "fortress hubs" where a single airline dominates a significant share of passenger traffic at key airports, such as Atlanta, Dallas, and Newark.[ 00:27:49-00:28:11 ]

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 The decision to block mergers, such as the proposed JetBlue-Spirit alliance, has been criticized for potentially leading to financial instability for smaller carriers and hindering their ability to compete with larger airlines.[ 00:29:17-00:30:09 ]

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 Additionally, many smaller and mid-sized communities are experiencing a loss of air service, impacting their economic development and connectivity.

Passenger Experience and Fees

Passengers often face inadequate seating, confusing fare structures, and a proliferation of ancillary fees, which many describe as "junk fees."[ 00:34:04 ]

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 A substantial portion of airline revenue comes from loyalty programs and credit card partnerships, sometimes exceeding profits from air operations alone. Some ultra-low-cost carriers, like Frontier, have been criticized for paying gate agents incentives to charge for carry-on bags, leading to customer harassment and additional unexpected costs. Concerns were also raised about the potential for AI-based surveillance pricing, where personal information and browsing history could be used to set individualized, dynamic fares.[ 02:00:17 ]

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 The current lack of comprehensive passenger rights in the U.S. and federal preemption restrict state oversight, leaving consumers vulnerable to potentially unfair practices. While Airlines for America denies collusion and bounty systems, consumer advocates argue that airlines are often in lockstep on pricing and fees.

Challenges for Smaller/Value Carriers and Potential Solutions

Value airlines, such as Allegiant and Frontier, aim to offer lower fares and expand air travel access, particularly to underserved communities. However, these carriers face significant challenges, predominantly limited gate access at airports where dominant airlines hoard gates, preventing new competition. Proposed solutions include implementing "use it or lose it" rules for gates, requiring common use facilities, strengthening DOT enforcement authority, and increasing transparency in gate lease agreements. Modernizing antiquated air traffic control (ATC) systems is also seen as critical to increasing overall industry capacity and facilitating more competition.[ 00:32:01 ]

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 Some smaller carriers suggested that allowing them to collaborate or granting them antitrust immunity could help them better compete with the "Big Four." International joint ventures are also highlighted as a way for value airlines to scale and offer more affordable international travel options.

Tone of the Meeting

The tone of the meeting was largely concerned and critical regarding the current state of the airline industry, particularly among senators and consumer advocates.[ 00:33:32 ]

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 Discussions were at times divisive and contentious, especially when addressing ancillary fees, the use of personal data for pricing, and gate access, with clear disagreements between airline representatives and critics. Many speakers were advocacy-oriented, presenting specific legislative and regulatory proposals to improve competition and passenger rights. A palpable sense of frustration was evident from senators regarding current airline practices and a perceived lack of accountability and transparency.

Participants

Transcript

Thank you.
I'll call the hearing to order.  Thanks to all of you for being here.  We look forward to today's conversation.  Every day in America,   Millions of passengers rely on airlines to get them safely, easily, and efficiently to life's most important moments.  Weddings, funerals, the birth of children and grandchildren, professional opportunities, job interviews, meeting with clients, old or new, and even in some cases, daily commutes.  Air travel has become and genuinely is essential to our lives.   Since deregulation of the airline industry began in 1978, and increasingly in the years that followed from that, competition has driven affordability innovation and improved service in countless respects within the industry.  For decades, rivalry among carriers allowed for consumer choice, and it kept fares within reach.  Yet in recent years,   there has been significant consolidation in the industry.  This has reshaped, in some ways, the US airline market, reducing the number of total competitors.  Today, there are just four major carriers, American, Delta, United, and Southwest, that control over 80% of US domestic air travel.   And that's a change from not too many decades ago when there were more players than that, far less market concentration.  Legacy carriers have invested in creating a hub and spoke model.  The model routes passengers through central airports more efficiently, and that has the effect of lowering maintenance costs, increasing connectivity, and otherwise increasing the beneficial network effects available to a larger airline.   The hub system has also created some dominant positions, particularly at a few key airports.
In Atlanta, Dallas, Fort Worth, Charlotte, and Newark, for example, a single airline controls between 70% and 80% of passenger traffic.   In Salt Lake City, St.  Louis, and Minneapolis, one carrier accounts for roughly 60% of passenger traffic.  Even at airports with far less concentrated market shares, carriers often don't compete on the same routes, leaving travelers effectively with only one direct option for a specific destination.   Some of this, of course, is going to happen in any system that involves as many cities, as many places where people might want to travel as others.  Nonetheless, we see the trend as what it is, a trend that is perhaps resulting in less competition within the industry than we've seen at times in the past.   This concentration is, at least in part, the result of a wave of mergers.  Delta Northwest, then United Continental, and Southwest Air Tram.  The Obama administration initially challenged the American-U.S.  Airways merger, but it reached a settlement, one that seemingly failed to address the broader nationwide concerns alleged in the complaint in that case.   Most recently, the Biden administration blocked the proposed JetBlue Spirit merger, ostensibly to preserve Spirit as an ultra low cost competitor.  In that case, the Department of Justice took an acrobatic distortion and contortion of the market and overlooked a lot of the real world dynamics.  The merger likely would have enhanced competition by creating a more financially stable airline,   with a larger network, one that could provide additional competition to the legacy carriers.  This would have enabled more competition with these legacy carriers nationwide.
And one thing we know about competition, it tends to bring down prices, and it tends to result in improvements to quality as different competitors try to compete for the money of the passengers they want to carry.  Yet after that merger was blocked, Spirit   ended up filing for bankruptcy, as many predicted.  This development raises key questions about enforcement and our antitrust framework, such as how a market ought to be defined and whether the failing firm defense captures real-world dynamics and incentives, and how this ought to frame how we think about antitrust law and the manner in which it's enforced moving forward.  Low-cost carriers   And ultra low cost carriers have been an important competitive constraint on pricing, of course.  There's a lot that they add to the picture.   When one of these airlines enters a market, average fares typically drop, at least for the affected routes.  But those competitive forces are facing financial headwinds.  Spirit is in bankruptcy.  Southwest is abandoning, in some ways, the very business model that made Southwest the disruptor that it's been, eliminating free checked bags and charging for seat assignments, moving closer to the legacy carrier model.   JetBlue's partnership with American and the proposed merger with Spirit were blocked.  JetBlue is now seeking a collaboration with United in order to survive.  Broader economic conditions also present challenges.  Aircraft supply shortages, engine repair delays, and rising labor costs all contribute.   and weighing on the overall competitive dynamic in the industry.  Additionally, with fewer competitors than we've had in the past, the remaining airlines can coordinate on capacity more easily.

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