You are not going to read a lot from me on the latest revelation that the U.S. Department of Justice (DOJ) is investigating the airlines for possible collusion on pricing. While I do have a strong opinion on that, suffice it to say that I think the DOJ has a difficult case to prove, the issue itself flies just close enough to my day job orbit that I’m going to refrain from a great deal of pontification. I will say that it makes for an interesting headline, but it is likely to be years before anything comes of it, if ever. There’s no real need dwell on it at the moment. I’ll also repeat a quote from a piece I wrote on March 5, 2014.
“I can think of no other industry where so much wealth has been transferred from the pockets of shareholders, the companies they own, and the people they employ into the pockets of consumers than that of the U.S. airline industry in the last 30 years or so, especially since 9/11/01.”
Airlines serve a lot of different masters –
- Aircraft and Engine Manufacturers along with leasing companies
- Wall Street analyst types
It’s quite the circle of interest groups, some of whom haven’t made the mental move past the days when airlines routinely gave away product below cost in the name of driving market share. The newcomer in all this is Wall Street. No, there have always been stock analysts that followed the industry, it’s just that airline stocks have become, for the first time in my memory, a potential longer term investment. With DOJ coming down on airlines for things like “capacity discipline,” am I the only one who noticed that Wall Street has been beating up on airlines for growing too fast? (Image courtesy of Shutterstock.com)
But what about us? The customer. The frequent flyer. I have always believed airlines went about the necessary work of remaking their business models the wrong way – they tied things like baggage fees too closely to the singular idea of high fuel prices. Mind you, fuel prices are still not “cheap,” but they are definitely off their highs. When the oil bubble popped, the airlines had handed politicians an ideal talking point to hammer them on. In the end, I don’t think anything changes for customers in the near to medium term. Like I said, it is likely that any outcome from the DOJ investigation is years away, if ever. However, could one speculate that it might give airlines pause when they are thinking about what hammer to drop on us next in the loyalty space? I’m not sure, but I’ll be watching with great interest to see how all this plays out.
-MJ, July 3, 2015