Domestic travelers paid an average $390 for round-trip flights in the third quarter of 2013, a 5.1 percent increase from a year earlier. Rapacious airlines reaping the rewards of industry consolidation? Not quite. That average domestic fare has declined more than 11 percent since 1995, according to inflation-adjusted data released on Tuesday by the U.S. Bureau of Transportation Statistics. Airlines often point to such declines when defending the necessity of their merger spree and the fact that fierce competition still exists in the industry.
But not all airports are equal—and the ones with a dominant hub airline tend to extract more from travelers’ wallets. Of the five airports with the highest average fares, three of them are United (UAL) hubs: Houston-Bush ($507), Washington-Dulles ($506), and Newark-Liberty ($491). Another in that group, Cincinnati ($531), has been a Delta Air Lines (DAL) hub for many years. Delta has curtailed its flights there, but the airport has been unable to lure much discount airline service beyond Frontier’s nonstop flights to Denver.
Airlines can often charge more for flights out of a hub, because they tend to be nonstops, whereas another carrier might make a stop along the same route (perhaps at a hub of its own). Given that most travelers, especially those flying for business, prefer to skip connecting flights when possible, a hub’s dominant carrier can end up with significant pricing power.
The most expensive average fare was $559 in Huntsville, Ala. The lowest average fare was $157, in Atlantic City, N.J., where Spirit Airlines (SAVE) has been adding new flights to Florida and United will start new flights on April 1.
The largest third-quarter fare increase, 23 percent, was in Atlanta, Delta’s home airport and a major focus for Southwest Airlines (LUV), which is dismantling the hub operation its AirTran Airways subsidiary has operated there. Southwest isn’t taking a meat cleaver to its Atlanta schedule, but it is reducing the number of flights and incorporating the city into its traditional network, which operates point-to-point service with focus airports in Baltimore, Chicago, Dallas, Houston, Las Vegas, and Phoenix. That transition helped cause the sharp jump in fares.