ChameleonsEye/Shutterstock.com

Fares and profits are rising, even as seat and flight supply are falling.

If you feel like you've been paying more for fuller flights lately, that's only because you've been paying more for fuller flights. But rest assured the airline industry appreciates your pocketbooks and your patience. Since doing a nose-dive during the recession, the industry has corrected course and reached new heights (so to speak); U.S. passenger airline revenues grew 29 percent between 2009 and 2012, to $156 billion:

That chart comes courtesy of a new report from the Government Accountability Office on the state of the U.S. airline industry. GAO prepared the report in response to the rash of recent mergers. Four airlines (American, Delta, Southwest, and United) now account for 85 percent of all passenger travel, and there are fears this consolidated will hurt competition, and by extension, consumers.

It's too soon to assess those fears completely, but what's clear from the recent profit figures is that the industry itself isn't the one hurting:

So what accounts for all that cash? For starters, to state the obvious, as the economy improved people started flying again. Then of course there are the extra fees that have become a mainstay of air travel. GAO says the industry generated $6 billion in extra fees in 2012, up from $1.4 billion in 2007 — and that's a low estimate, since airlines only report baggage and reservation fees.

Basic fares are higher, too. The price of domestic tickets rose from roughly $183 to $190 (inflation-adjusted) between 2007 and 2012, a leap of about 4 percent. One reason is that the so-called "Southwest effect," in which low-cost airlines drag down fares, is far less effective than it used to be. Three airports with the largest fare increases between 2007 and 2012 have a big Southwest presence (Chicago Midway, Dallas Love Field, Houston Hobby). GAO cites an MIT study showing how limp the Southwest effect has become — specifically for Southwest:

To top it all off, even as demand rises and prices are padded, airlines aren't making more seats available to travelers. Seat capacity decreased about 10 percent from 2007 to 2009, according to GAO, but since the recession — perhaps in preparation for another one — seat capacity has remained flat. Medium-sized markets have taken the biggest hit in available flights and seats, but the decline runs across the board:

When you combine increased demand with higher fares and fewer seats you get fuller flights, from a passenger perspective, and bigger revenues-per-seat, from an airline perspective:

Increased competition could neutralize these trends, but there hasn't been much of that, either. The following GAO chart divides the U.S. domestic market into five city-pair sections, from most to least trafficked. The average number of competitors hasn't moved much in the top market and fell noticeably in the bottom market (below). In 2007, 72 percent of all city-pairs had a dominant airline (with more than a 50 percent share); in 2012, that figure hit 77 percent.

While it's easy to kind of hate the airline industry if you've read this far, it's also hard to blame it. Air travel is subject to huge, unpredictable swings — see, in recent times, 9/11 and the Great Recession — so storing up cash when you can is shrewd business. Extra fees and a la carte services are a pain, but in-flight amenities have improved, with entertainment consoles and WiFi and food options. And while the full effects of the mergers are still playing out, the fact that competition didn't take an immediate plunge could be seen as a win.

But, yeah, you're not the only one to notice that flights seem more expensive lately, and that somebody always takes that middle seat.

Top image: ChameleonsEye / Shutterstock.com

About the Author

Most Popular

  1. Homes in Amsterdam are pictured.
    Equity

    Amsterdam's Plan: If You Buy a Newly Built House, You Can't Rent It Out

    In an effort to make housing more affordable, the Dutch capital is crafting a law that says anyone who buys a newly built home must live in it themselves.

  2. In this image from "No Small Plans," a character makes his way to the intersection of State and Madison Streets in 1928 Chicago.
    Stuff

    Drawing Up an Urban Planning Manual for Chicago Teens

    The graphic novel No Small Plans aims to empower the city’s youth through stories about their neighborhoods.

  3. Transportation

    China's 50-Lane Traffic Jam Is Every Commuter's Worst Nightmare

    What happens when a checkpoint merges 50 lanes down to 20.

  4. Plogging combines running with trash picking.
    Life

    Pick Up Trash While You Exercise. It's Called Plogging.

    If the Swedish fitness trend is more than just a fad, it’s a win-win for everyone.

  5. Design

    Cities Deserve Better Than These Thomas Heatherwick Gimmicks

    The “Vessel” at New York’s Hudson Yards—like so many of his designs—look as if the dystopian world of 1984 has been given a precious makeover.