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Airline mergers are good for consumers, apparently

Daily Ticker

Few people enjoy flying these days, especially in coach where they're crammed into shrunken seats and charged for food that was once free. Tighter, more crowded plans and other changes--especially fees for baggage and other extras--have been helping airlines survive. So have a spate of mergers that have reduced the number of big carriers. There are now four major airlines--down from seven in 2007--and they control about 83% of domestic flights.

That may not be so bad, however. A new report from the Government Accountability Office found that those mergers have not hurt consumers much because they haven’t had much impact on competition. The report, studied the mergers that created today's Delta Air Lines, Southwest Airlines and United Continental (but not the December merger of American Airlines' parent AMR Corp and U.S. Airways, which occured after the GAO study began). Even though mergers often lead to consolidation and decreased supply, the GAO found that on the 37 most-traveled routes in the United States, the average number of airlines providing nonstop or connecting service fell from 4.4 in 2007 to 4.3 in 2012. In other words, no appreciable change.

Related: JetBlue introduces a premium class with lie-flat seating

At the same time, the GAO did find that during that same period airlines reduced the number of domestic flights by 14%, which helps explain why flights are more crowded these days. Airlines also raised fares by 4%, after accounting for inflation. And that doesn't include all the new fees, which have become an important source of airline revenue. 

As those mergers were taking place, consumer advocates worried that airfares would skyrocket as competitors disappeared and airlines cornered various markets. What has happened instead is the industry became stable and profitable, after years of losses. "There has been some increased cost to flyers [but] what they're saying is this has also resulted in a more stable industry, which in a way is better for consumers too," says Yahoo columnist Rick Newman.

Related: Business travel is taking flight again: Hyatt CEO

Mike Santoli, senior columnist at Yahoo Finance, agrees."There's something to be said for not having these companies go into bankruptcy en masse every cycle."

And the fewer number of domestic flights by the big airlines has created opportunities for airline startups. "That one of the things that is helping to keep airfares down," says Newman.

The feds are targeting the wrong hidden travel fees

It's also weirdly bringing back the past. Two of the startups planning to take off in the coming months have  the same names as airlines that once flew and eventually went out of business: PEOPLEExpress and Eastern Air Lines.

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