The Domestic Airline Industry Remains Fiercely Competitive

For decades, U.S. airlines were plagued by cycles of bankruptcies and layoffs, unable to cover costs of capital or invest in better service. Customers and employees both felt the impact of the “lost decade” following 9/11, when the entire U.S. airline industry suffered from severe financial issues.  Fortunately, mergers and restructuring have helped stabilize the industry, allowing U.S. airlines to reinvest in the business at historic levels:

FOR OUR CUSTOMERS: Delta is in the midst of a broad renewal of its fleet, retiring older aircraft and bringing in new, state-of-the-art jets that are transforming our in-flight service.  In 2017 Delta welcomed the A350 to its fleet – the airline’s new flagship aircraft introducing the award-winning Delta One Suite and Delta Premium Select cabins. The airline is also taking delivery of the new A220-100 domestic aircraft, formally called the Bombardier C Series that will feature the airline’s widest seat; we’re also investing $12 billion in new terminals and improved airport facilities across the country over the next 5 years. Delta also is investing hundreds of millions in new technology to make the travel experience more convenient and transparent than ever before. We also continue to invest in our already-unmatched reliability: In 2017, Delta operated a record 242 days with zero cancelled mainline flights.  Combined with our Delta Connection partners, we had 90 “brand perfect” days—days without a single cancellation across the entire system including Delta Connection flights.

FOR OUR EMPLOYEES:  Delta’s profit sharing program is unrivaled in the world for sharing profits with our employees.  In each of the past five years, we’ve shared more than $1 billion each year with our employees—a record no other company has matched. Total annual employee compensation has increased by 80 percent since 2008.

FOR OUR FUTURE:  We’ve placed the airline on the best financial footing possible by paying off more than $10 billion in debt in the past decade and investing nearly $9 billion in our pension, steps that ensure Delta’s long-term financial health.

The U.S. airline industry has settled into three different business models to provide customers with maximum choice. Global network carriers, like Delta, provide worldwide reach and connect the world through a hub-and-spoke model; point-to-point carriers provide direct flights on specific routes primarily within the U.S.; and low-cost carriers provide cheap airfares to popular destinations.

The competition within and among each model drives prices down while striving for the best customer service possible—proof of which can be seen in all-time high measures of customer satisfaction and airline operating performance, confirming that the industry is delivering substantial benefits to customers.

Global Partnerships

For decades, international aviation laws have reserved domestic flights for domestic carriers, meaning only a U.S. airline can operate a flight within the U.S. and the same applies to foreign countries.  In order to create seamless experiences for customers traveling internationally, U.S. airlines have formed a global network of alliances with foreign airlines, so that someone traveling from the U.S. can purchase a single ticket that will bring them to U.S. airline hub (Atlanta), connect to an alliance hub (Paris), and then on to a final destination.

These partnerships with international carriers have been achieved through “joint ventures,” which are essentially “virtual mergers” of the two operations over a specific region.  The customer benefit of a joint venture is that the partner airlines are solely focused on what is best for the customer, including more frequent flights, seamless and convenient connections, and lower fares.

Greater Consumer Choice

Consumers have many choices when it comes to which airline they fly, and they can buy a ticket at a price that fits their budget. When the industry was regulated, there were only two classes of services—first class and economy. Both were relatively expensive and inaccessible to most middle-class Americans.  Delta now offers four options for our customers to make the choice that is right for them—Basic Economy, Main Cabin, Delta Comfort Plus, and First Class/Delta One. At Delta, we are refining our offerings to provide service options that are tailored to specific customer segments, including business travelers, leisure travelers, families and college students.

Smaller Carriers are Expanding

Since 2000, Southwest, Alaska Airlines, Frontier Airlines, Allegiant, JetBlue and Spirit have all expanded operations, fleet size and destinations, making the industry even more competitive. Not only are smaller carriers expanding in the number of passengers but they also have grown their share of the market showing that competition is robust.

competition chart

Deregulation was a Success

In 1974, when the government still regulated U.S. airlines like a public utility, dictating where they could fly and what fares they could charge, an airline had to charge $1,442 in inflation adjusted dollars for a one-way flight between New York City and Los Angeles. When the airline industry was deregulated in 1978, airlines were free to innovate new business models based on free market principles, which led to better service and lower fares.1  In 2017, the average cost of that same New York-Los Angeles flight was $367. 2

There are a record number of flyers year-after-year because the ability to travel within an affordable budget continues to expand.  Delta, for example, experienced the busiest summer travel season in its history in 2018.  Yet in many ways the airline industry remains among the most regulated (and heavily taxed) industries in the United States, subject to over 13,000 regulations across 20 different federal agencies.  The FAA can and should have a strong role in regulating safety—the safety of the traveling public is the highest priority for every airline.

However, the current success of airline deregulation—evidenced by record low fares and record high numbers of air travelers—is based on the government staying out of the business of aviation. Consumers have clear choices when it comes to travel, choices that have been created as a result the government giving airlines the economic freedom to innovate and develop different business models, all while maintaining the world’s greatest aviation safety record.

[1] Airlines for America, based on [DOT data]
[2] U.S. DOT Data for 2017