With recent changes, the three remaining major legacy carriers aren’t being held to a higher standard. Due to the consolidation of legacy carriers, the overwhelming majority of remaining carriers are Ultra-Low-Cost Carriers, such as Spirit Airlines and Allegiant Air, and Low-Cost Carriers, such as JetBlue Airways and Southwest Airlines. Their previously superior products were held against competition originating with other legacy carriers. However, as they consolidated together, legacy carriers began to follow the Low-Cost Carrier standard. U.S. Airways was unique when compared to the other legacy carriers because they had a business structure of a leisure airline, while the other major legacy carriers focused on providing a superior, premium product. Consequently, when U.S. Airways merged with American Airlines, they essentially merged their business structure, thus creating a domino effect with Delta Air Lines and United Airlines. When American Airlines began implementing these changes, Delta Air Lines and United Airlines began the same process because they saw these as like an opportunity to maximize profits. Their primary competition was each other, so if one began to decrease their quality, they all did.
In 2011, American Airlines filed for bankruptcy after their fourth consecutive year of annual losses (B). During those four years, American Airlines lost nearly $5 billion (B), which sparked the need for a major managerial change. From there, American Airlines decided to implement a reconstruction plan (B). This plan included freezing pensions and reducing labor costs by 17%. However, this simply wasn’t enough for the struggling airline to produce a profit. This is where the plan to merge with another airline began. Many recent airline mergers had saved struggling airlines from imminent bankruptcy. Examples include the Delta Air Lines and Northwest Airlines merger in 2008, the United Airlines and Continental Airlines in 2010, and the Southwest Airlines and Airtran Airways in 2011 (B). WHY DID US AIRWAYS DO IT? This led to US Airways and AMR Corporation to agreed to a stock swap valued at $1.8 billion (c) . Both companies determined this merger would reduce operating costs by $150 million annually (A). However, this proposal didn’t receive support from the public. Many lawsuits were filed, citing it was violating Section 7 of the Clayton Antitrust Act (E?). The Department of Justice as well as the governments of the states of Arizona, Florida, Michigan, Pennsylvania, Tennessee, Texas, and the District of Columbia were among the few lawsuits (E) because it would drastically reduce competition within the airline industry and were apprehensive of the negative outcomes that would arise. They were worried that airlines would have too much power and passengers would have to pay more for airline tickets. Their fears were not unfounded because after the Delta Air Lines and Northwest Airlines merger, fares had increased by 5.1% (C) . In order for the lawsuits to be dropped, the companies would have to agree to the sell off of certain assets. Therefore, after many negotiations the companies agreed to sell 104 take-off/landing slots at Ronald Reagan Washington National Airport and 34 take-off/landing slots at LaGuardia Airport, as well as two gates at Boston International Airport, Chicago O’Hare International Airport, Dallas Love Field, Los Angeles International Airport, and Miami International Airport (C) . However, it came with one major stipulation. The aforementioned stipulations were required to go to Low Cost Carriers. This allowed for the growth within that sector or airlines and reduce the market control of legacy carriers. While this would help offset the price increase that would come from this merger, it ultimately led to a decrease in the passenger experience on the combined airline.
One place that they all decreased the quality in was their airplane seats. Since the merger between U.S. Airways and American Airlines, the combined company is beginning to take delivery of their brand new Boeing 737 MAX 8 aircraft (Genter). This aircraft will give an idea of the future of aircraft comfort when they take delivery of new aircraft and retrofit existing aircraft in the future. One major change is a decrease in seat pitch in economy, or “Main Cabin” as American Airlines calls it. Seat pitch is “the distance from any point on one seat to the exact same point on the seat in front or behind it,” as defined by SeatGuru, an independent company that focuses on providing the public awareness of what to expect on a flight (“Frequently Asked Questions”). On board the new Boeing 737 MAX 8, American Airlines will be implementing economy seats with only 30” of seat pitch, and premium economy seats, or “Main Cabin Extra” as dubbed by American Airlines, with only 33” of seat pitch. (Genter). When compared to the seats available on their current Boeing 737-800, the seat pitch has decreased. For example, American Airlines provided 31” of seat pitch for Main Cabin seats and 34”-40” of seat pitch for Main Cabin Extra seats (“American Airlines Seat Maps”). The primary reason for this subtle, but noticeable difference is the implementation of “slimline seats.” Slimline seats are aircraft seats that are thinner and lighter than seats in the past, all in an effort for the airline to reduce fuel savings (Bachman). Due to their lower weight, it will take less fuel for the aircraft to fly them, but they come at a disadvantage to the customer. These seats create back pain and discomfort sooner than previous seats due to a lack of padding, making long-haul flights unbearable.
In addition, the Boeing 737 MAX 8 aircraft will lack seat-back in-flight entertainment screens. Not only will this reduce the weight of the aircraft, leading to a decrease in fuel consumption, but the airline will no longer have to purchase these expensive screens. According to Dan McKone, Managing Director and Head of Travel and Transportation Practice at the consulting firm L.E.K, seat-back entertainment screens can cost approximately $10,000 (White). With their Boeing 737 MAX 8 aircraft being fitted with 176 seats, it would cost approximately $1,760,000 to fit each seat with a screen, on just one of the 100 planes on order of that type (“American Airlines Fleet”). That doesn’t take into consideration maintenance costs and fees to stream specific entertainment options (Cortez). As a replacement, American Airlines will have passengers stream entertainment to their personal devices. However, this will mean entertainment will not be available to all passengers. According to Pew Research Center, only 68% of American adults have a smartphone and 45% have a tablet computer (Cortez). With an overwhelming number of Americans lacking technology, they will have to suffer from the missing availability of on-board entertainment. Moreover, this transition to streaming onto personal devices for entertainment poses a security concern. It is extremely easy for a person on board an aircraft to hack the system and steal anything from personal information to credit card information (Cortez). For example, the security firm IOActive found multiple flaws and concerns in the Panasonic Avionics in-flight entertainment streaming system, used by many airlines around the globe (Cortez). Since then, the firm recommended fixes to Panasonic Avionics, but that is just one of the many systems available on the market, and this surely won’t be the only example of hacking to in-flight streaming systems.
Furthermore, as a way to compete with Ultra-Low Cost Carriers, the remaining three major legacy carriers have implemented “Basic Economy.” Basic economy is the most restricted economy ticket that lacks many perks and benefits of flying other fare classes in economy. For example, passengers booked in basic economy for a domestic flight on American Airlines will lack a complimentary carry-on bag, and will only be allowed to bring one small bag to put under the seat in front of them if they want to avoid the fees for additional bags that some passengers will receive complimentary. Additionally, basic economy passengers will not be eligible to receive complimentary upgrades that elites would normally be entitled to, limited earning on elite qualifying miles and award miles, as well as being ineligible to make flight changes. Lastly, they are the last passengers to board the aircraft and will not be able to assign their seats for the aircraft until 48 hours before the flight, which still has a fee to do so (“Basic Economy”). All of these restrictions would be off-putting to business travelers and frequent flyer program elites. Many business travelers require the additional suitcase and appreciate the complimentary upgrades, while elites of frequent flier programs value their award miles. This would lead to them paying the premium to avoid basic economy, leading to increased revenues for the airlines.
Prior to the merger, American Airlines frequent flier program, AAdvantage, used aa distance-based reward program. However, in 2016, American Airlines implemented a revenue-based reward program (1). A distance-based program means that a traveller will be rewarded “x” amount of miles that has a correlation with the distance the traveller flew. Meanwhile, a revenue-based program means that a traveller will be rewarded based on the amount in dollars that passenger paid for that ticket (N). This led to a massive decrease in the number of miles passenger will earn from flights. For example, frequent flier and travel blogger Zach Honig explains a hypothetical situation where a $340 roundtrip ticket from John F. Kennedy International Airport to Los Angeles International Airport would previously earn as much as 10,000 miles from that single trip. However, under the new system, that same traveller could earn as little as 1,500 miles (1). In addition, the new program is accompanied with a new earning restriction. The redesigned system limits the number of award miles per trip to 75,000 (N).