US Airlines Want To Work Together, Consolidate Domestic Flights

US airlines have just gotten $50 billion in government aid, and now they’re already looking for ways to skirt the terms that they agreed to…

“Ladies and gentlemen, welcome aboard this American Airlines flight, operated in conjunction with our codeshare partners, Delta Air Lines, Southwest Airlines, and United Airlines.”

Could that soon be a reality?

The CARES ACT made sense

Late last week we saw the passing of the $2 trillion CARES Act, which was an overwhelmingly bipartisan effort to inject some money into the economy.

It’s far from perfect on many levels, but that’s to be expected:

  • Nobody knows how long this situation will last, or how bad the economy will get, so it’s tough to know the appropriate measures to take when you have no sense of how bad the situation will get
  • Overall the CARES Act is well intentioned, though you can always point out specific situations that are questionable (obviously these are extremes) — so there’s no aid directly for restaurant workers, while the government is essentially directly taking over payroll for airlines, paying the ~$300K salaries that senior captains at major US airlines make?

The truth is that no matter what kind of stimulus the government comes up with, there will always be examples where you say “that doesn’t seem especially fair.”

Government aid for airlines comes with some conditions

The airline conditions were well intentioned, but…

In exchange for giving airlines this relief, the government has requested US airlines do two things through September 30, 2020:

The idea behind both of those makes perfect sense. The government:

  • Recognizes the importance of the airline industry, and the ability for the industry to rebound once demand does; if you lay off pilots now and demand recovers, the process of retraining pilots will be time consuming and costly
  • Wants service to continue to smaller markets that might otherwise be cut off from the outside world, since there’s still some essential travel that needs to take place

While the idea behind both of these makes sense, the practical implications are a different story:

  • United Airlines’ CEO has already made it clear to expect lay offs as of October 1, 2020, when the government aid stops, since they expect the decrease in demand to last a long time
  • While I can appreciate the desire to have some service to all markets, does it really make sense for every single airline to operate flights to smaller markets, given that most planes are empty?

What happens come October 1?

US airlines want to be able to consolidate service

CNBC reports that US airline executives will be meeting with the Department of Transportation this week, and one of the topics of discussion will be service consolidation.

As one airline executive commented on background:

“Does it make sense for more than one of us to be flying to a city when there are only a few seats filled on each plane? It may make more sense to maintain service to that city, but put all passengers on one plane.”

It’s a totally valid point. For smaller markets that are served by many airlines, it seems counterproductive to operate many flights per day, when each flight is almost empty.

The issue is the logistics of seeing airlines consolidate service:

  • How will pricing be set to ensure that it’s still competitive? If only a single airline operates a route, will we still see $16 fares? 😉
  • The process of negotiating revenue sharing and coming up with terms seems rather complicated in this situation

Could we soon see major US airlines working together?

Bottom line

US airlines apparently plan to present the DOT with the concept of working together to serve smaller markets. In many ways that’s logical, in terms of conserving cash, not flying empty planes unnecessarily, etc.

However, I suspect the logistics will be too much of a roadblock, and will ultimately lead to this not happening.

But my gosh, if you told me a few months ago that in 2020 US airlines would be trying to work together as one to operate some domestic flights, I would’ve told you to get outta here…

What do you make of this concept from airlines?

Conversations (43)
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Jim Guest

This was the situation pre-deregulation. The carriers would allot certain routes to certain airlines, and basically not compete with each with each other. Fares were inflated, service was limited. Granted, times now are challenging, but there should be at least 2 carriers operating even in essential markets.

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Robert Pierce Guest

Dominic, Your comments all offer but one conclusion, to be made any reality. There would have to be a return to a regulated environment for the US air traffic system to use mode of your conclusions. Need to return to a Civil Aeronautics Board.

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Dominic Yeo Guest

I don't know why people are so worked up about this. Before we continue, I'd just like to say: JetBlue and Alaska need legislation or something, to prevent them from being the targets of a price war between the big 3 and ends up so overpriced, it will definitely lead to the bankruptcy of the two airlines who buy them. Call it TWA buying whoever, or Pan Am buying whichever, or AA merging with US Airways, a merger it really didn't need, but I believe this is the spark for the beginning of the end of American. The biggest benefit is that this will reduce the likelihood of American, Delta and United in a needless constant battle to the detriment of customers in the domestic and regional markets. It will reduce cost cutting, lower congestion and improve service and punctuality. This for example, will greatly help Northeast America shuttle flights. Second, they can plug gaps in the network that would be otherwise unprofitable if they attempted it themselves. For example, UNITED needs to have some representation at JFK. United needs B6 domestic and regional to feed the partner airlines that can't realistically move all their operations to Newark or don't want to. Newark will NEVER be the New York airport. Public transport sucks, and most of us are not business travelers. Plus, there is a prestige - a genuine value to "JFK". Let's be very real here. JetBlue was NEVER going to fly to Europe. Yes, they've announced it, yes they have made a big hoo-hah about it. But they have not applied to the BAA or anyone in Europe. Where are they expanding into? It's obvious isn't it? Domestic. Where? Well, they have already run down American in JFK and BOS. Why not Chicago and Miami? That's why Neelman wants Breeze Airways - this outfit is being prepared to kill American and American Eagle from the east. Delta and Alaska may claim they're at loggerheads, but in the west coast, they have a very symbiotic relationship. They have a shared interest in ensuring Seattle is strong. They're definitely joining oneworld to suck American from the west. This would force American to make a play for Southwest. They already absorbed US Airways, aka the world's largest real LCC. Why not Southwest? Everyone who isn't BA-AA have been trying to breakup oneworld, presumably I suppose, is to remove the political implications that the 3 alliances have always stood to symbolize. The above cannot be allowed to spiral. Because we're starting to see UA and DL be selective about their closest airline partners. Don't BS me. Alaska and JetBlue are not even remotely fit for Singapore Airlines' Business Class passengers. The fact UA and SQ can't partner, has nothing to do with hostility... t(his is not some made up football rivalry) but anti-immunity issues. UA and SQ are the only ones who flies between US and Singapore. They have no choice but to compete. This is why CX and AA never JV. Or why 9W-ST JV never happened. KE-DL includes Singapore allegedly, but Singapore and South Korea are not even open skies. So the JV never applies. Plus, there are issues coming the DOJs way? Firstly, the fact they allowed Virgin America in, means on some level, the rules can be bent to allow "favorable" foreign brands to market flights. So, isn't this basically a virtual foreign airline operating US domestic routes. This blunder is really, really, really bad. Second, if Delta isn't the largest, who is actually in control of Delta? Third, if United can farm out its brand to Copa, why can't others do the same. Finally, we really do not need 3 flights by AA UA DL every hour. Or any 3 on say BOS-WAS or LAX-SFO. You have private jetshare for that. At most, between LGA-BOS or LGA-DC or LGA-PHL, ONE flight per hour, on a bigger plane or widebody even. NOT for business travelers, convenience but most planes flying empty. Just bloody codeshare.

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W Diamond

Perhaps if things get too dire we could see the government imposing minimum and maximum set fares for markets (like $100-150 one-way for transcon flights, $50-100 for LGA-MIA, etc.). As for medical workers who need to travel, the airlines could offer special fares (such as Delta who has free flights for medical professionals to certain markets).

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Robert Pierce Guest

Many of the concepts you speak of here, have been in place for many years. Revenue sharing, flight sharing, equipment sharing have all been a part of aviation history. One part of this puzzle is the regulatory portion, and the need to make sure this never occurs again. The callous manner that the boards of most airlines conducted their finances, was truly criminal. We had deregulation work for the most part in a positive manner. However the fact the taxpayer has now been asked twice in less than 20 years to save the industry. And in between, most carriers went bankrupt, I think it’s time to return to a form of regulation, Return the CAB, to monitor the actions of the airlines, and their executives.

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