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The F8 of Facebook

by M.G. Siegler



The Economist on the state of the American airline industry:

Air fares are higher per seat mile in America than in Europe. When costs fall, consumers in America fail to enjoy the benefits. The global price of jet fuel—one of the biggest costs for airlines—has fallen by half since 2014. That triggered a fare war between European carriers, but in America ticket prices have hardly budged. Airlines in North America posted a profit of $22.40 per passenger last year; in Europe the figure was $7.84.

The airlines all famously say that they use these profits to improve the core experience for customers. Reality suggests otherwise

This happy combination of low fares and reasonable service has a simple explanation: competition. American policymakers have presided over a wave of mergers in the past few years. The biggest four carriers in America between them now control 80% of the market, compared with just 48% a decade ago. Warren Buffett, a man who knows an oligopoly when he sees one, bought nearly $10bn-worth of airline stock in 2016. In Europe, where the top four carriers have around 45% of the market, policymakers have got three things right.



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