Competition in Air Transportation

Economists from Compass Lexecon commented on a Request for Information issued by the Departments of Justice and Transportation in late October 2024, in which they broadly cover topics related to competition in air transportation.

The views expressed in this paper are the sole responsibility of the authors and cannot be attributed to Compass Lexecon or any other parties.

The comments, submitted by Dr. Darin Lee, Erin Secatore, Dr. Ethan Singer, and Dr. Eric Amel and commissioned by Airlines for America, provide a detailed economic analysis of U.S. airline competition as well as certain airline business practices, including the growth of ancillary fees, transparency in the marketing and distribution of airline tickets, and airline reward programs. 

The data-driven analysis supported three principal takeaways:

• The U.S. airline industry is intensely competitive notwithstanding the industry consolidation that has occurred this century.
• The industry’s modest profitability over the last 15 years—facilitated by consolidation—has enabled U.S. airlines to reinvest in their labor forces and high-quality American jobs.
• Concerns over airlines’ ancillary fees, distribution practices, and reward programs are misguided: contrary to various critiques, ancillary fees lower fares on average, airlines have significant incentives to market and distribute their products with full transparency, and airline reward programs are a popular dimension of service on which airlines vigorously compete for customers.