The competitive landscape is more intense than it was before the COVID-19 pandemic
Flights are getting cheaper, which is good news for consumers but bad news for some industry players. Bloomberg reports that so-called “legacy” airlines like Delta Air Lines and American Airlines, have started charging cheaper fares and muscling in on territory that used to be held more securely by the likes of Spirit Airlines an Southwest Airlines.
The U.S. Bureau of Labor Statistics tracks air fares as part of the basket of goods making up its consumer price index inflation gauge, and that measure says that fare growth has been negative for more than a year, a streak going back to April 2023.
Bloomberg says that legacy airlines pulling moves like price-matching makes it harder for lower-fare competitors to thrive in their niche. Part of the reason why is that business-class travelers aren’t flying like they used to, according to Spirit Airlines CEO Ted Christie.
“Corporate travel demand is not back to where it was pre-COVID, even though it appears to be moving in the right direction,” he said during the carrier’s earnings call last month. “We don’t normally carry a lot of that. But that is a demand segment that does not exist to the extent it did pre-COVID. And so that’s changing at least the way the airlines are competing for traffic.”
American Airlines is trying to regain its footing after realizing that its earnings aren’t where the company wants them to be, and CEO Robert Isom said at an industry conference last week that its own struggles with business-class travelers aren’t the only thing hurting its bottom line.
“The marketplace has definitely gotten much more competitive,” he said.
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