The lessons US airlines can learn from Europe
Why are air travel prices so high in the US? To what extent might the European model represent a way forward?
Why do North American airlines currently enjoy profits of $22.40 per passenger last year when in Europe the figure is just $7.84? What conclusion might we draw from this? What implications does this have for customer satisfaction?
US airlines in particular have been plastered across headlines over the past few weeks due to a series of high-profile incidents and it’s time to explore the reasons as to why aviation is such a moneymaker for airlines in North America and why some passengers are fed up.
In the US, just four airlines control 80% of the market whereas in Europe the top four have a 45% share
Jet fuel has dropped over the past five years and in Europe, this sparked a price war on the continent as we witnessed the supremacy of the low-cost emerge. However, despite the profit margin standing at three times the amount in the US when compared to Europe, the service is widely considered to be significantly inferior. A case study from which we might draw several conclusions concerns the world’s most successful low-cost airline, Ryanair.
Previously, when the Irish carrier trimmed its service and costs to the bone, public outrage followed and forced the airline to change tack and make a conscious effort to better treat its passengers. This was ultimately driven by market forces and competition.
By contrast, in the US, just four airlines control 80% of the market whereas in Europe the top four have a 45% share. This is due to responsible regulation in Europe so as to ensure competition. In the US, many of the largest hubs are reliant on a single airline to occupy more than half of its capacity and the deal between US and American Airways in 2013 is indicative of a wider acceptance of mergers. As dependence both from consumer and airport on a single carrier has increased, so have the prices. The encouraging of competition among airports in Europe too reflects the competitive environment between airlines and this too ensures prices are kept competitive.
The European model is not perfect and often distances are naturally shorter between airports, but ultimately, the dissatisfaction with both the price and service of US airlines can be attributed to a decline in competition.