One of the reasons that the Department of Justice objected to the merger of American Airlines and US Airways was a fear that allowing the two companies to form the world's largest airline would raise ticket prices. A report from the Associated Press says that the Department of Justice acted too late, cheap fare are already a thing of the past.
The airline industry has seen the number of major airlines in the United States drop from nine in 2005 to five, four if the merger is eventually allowed to happen, today. With so few airlines there is less competition. Since 2008 the average cost of a roundtrip domestic flight, including the much hated baggage fees, has gone from $351.48 to $378.62, according to the Associated Press.
The argument for the consolidation of the industry is that it has made the industry far more stable than it was immediately following the end of government deregulation in the late 1970's. Airline employees enjoy far better job stability now and business travelers have better rewards programs as well as an easier time making connections, according to the Associated Press.
The bad side of the industry's consolidation is that families and vacation travelers face higher fares with a limited amount of options to choose from. An example that was given by the Department of Justice while blocking the proposed merger was that the new company would have controlled more than 60 percent of all departures from Ronald Reagan Washington National Airport, according to CNN.
"It's too late. It's already a very consolidated industry," Savanthi Syth, an airline analyst, said. "I don't know if you want to stop an industry from being profitable."
The government has argued that every time one airline adds a fee the rest of the pack follows in lockstep. In April United raised their fee for changing a reservation from $150 to $200. Within two weeks American, Delta, and US Airways had followed suit, according to the Associated Press.
Some airlines are still trying to keep ultra-low fares to entice customers. Spirit Airlines has set a model where they make up for the low fares by charging exorbitant fees for everything, including a fee for carry-on bags. The company that helped launch Spirit is planning on purchasing Frontier Airlines and setting up a similar business model, according to the Los Angeles Times.
