How America Broke Its Own Airline Industry

本站添加: 2026-05-10

[00:00:00]There were over a dozen airlines in the US in  1990. All of these. But today, just four companies control about 80% of all the flights you take  within the United States. Yeah, other airlines still exist. Frontier, Allegent, JetBlue, but  they're fighting for whatever's left. And that's just inside the United States. Here's where it  gets a little embarrassing. Onethird of the seats that come on planes in and out of the US are US  carriers. But wait, 60% of the passengers coming in and out of the US are Americans. So let's do  the math here. When Americans fly internationally, more of them are giving their money to airlines  that are not American because 2/3 of those seats are on foreign airlines. Think about Emirates,  Singapore, Qatar, Turkish, Korean Air. United CEO Scott Kirby has a name for this. He calls it  an airline trade deficit. His exact words. Today we have a big trade deficit with international  carriers. Many of them are effectively stateowned and state subsidized. That's bad for US  aviation. That's bad for US workers. But from a dozen airlines down to four at home and  we're handing our own passengers to the rest of the world. But how did this happen? I mean, did  the government let this happen? Did airlines let it happen? Today, we're going to break it all  down. Panama went out of business. We really got to know one another. Spirit Airlines is going  out of business. To understand how we got here, you have to go back to 1978. Only one airline in  the West gives you five across seating on every plane in the sky. PSA. There's plenty of room  on board. No airline serve St. Louis like Ozark.

[00:01:30]It's our hometown. Before that, the US government  basically ran the airline industry. They decided which routes airlines could fly. They set the  prices. It was a governmentprotected cartel, legal by design. Then President Carter signed the  Airline Deregulation Act. Suddenly, airlines could fly wherever they wanted and charge whatever the  market would bear. In theory, this was a great idea. More competition, lower prices, more people  flying. And at first, it worked exactly like that.

[00:01:56]New airlines launched everywhere. Ticket prices  dropped. Flying stopped being something only rich people did. But deregulation had a flip side that  no one talked about much. If you can't compete, you die. And a lot of them did. Let's run through  what happened. Panam. This was America's airline, the one that the world knew. Glamorous routes,  iconic blue planes, gone by 1991. deregulation plus a Gulf War fuel spike. That was enough  to finish them off. Eastern Airlines. This was one of the original big four carriers. It  didn't go out because of competition. It went out because of an internal war. Management  versus the mechanics union. Neither side backed down. The airline bled out, liquidated in  1991, same year as Panaman. Then there was TWWA, Howard Hughes's airline. Survived until 2001.  American Airlines bought it mostly just to get the international routes. Continental went bankrupt  twice. Twice. and then it merges with United in 2012. Northwest absorbed by Delta in 2008 for $3  billion. US Airways was itself a patchwork of four different airlines that had already merged and  it finally got folded into American in 2013. And the most recent one, Spirit Airlines, once one  of the most profitable carriers in the country, believe it or not, filed for bankruptcy in 2024.  No one came to rescue them, now shut down. But why does this keep happening? I mean, why is  the airline industry such a graveyard? Well, Warren Buffett says it best. He once joked that  investors would have been better off if someone had shot down Orville Wright's plane at Kittyhawk.  He later bought airline stocks anyway and sold them at a loss. The business, the business itself  is just brutal. First, there's fuel. Jet fuel is 20 to 30% of everything an airline spends. When  oil prices jump after a war, a crisis, a supply shock, airlines start bleeding cash immediately.  and they can't just raise prices fast enough to keep up. Then there's labor. Airlines are one of  the most unionized industries in America. Pilots, mechanics, flight attendants, all under  contract, all expensive. One labor dispute can literally ground a whole airline. Eastern  proved that debt. A single Boeing 787 costs over $200 million. Airlines borrow and lease enormous  fleets just to operate. When passengers stop flying during a recession, a pandemic, a war, the  debt doesn't pause. The bills keep coming. Spirit Airlines is a perfect example of all three things  hitting at once. They built their whole business model around cheap fuel. Their projections  assume, let's say, jet fuel at 220 a gallon, but they were actually paying 420, almost double.  JP Morgan found that they were losing money on basically every dollar of revenue, and there's  no recovering from that. But if small airlines keep dying, why do big airlines keep getting  bigger? Because when a competitor goes under, the big guys don't mourn. They move in. They buy  up the routes. They buy up the gates. They buy up the airport slots. The actual governmentissued  permission to land at a busy airport like JFK or LAX. Those slots are worth hundreds of millions  of dollars and you can't just create new ones.

[00:04:52]The merger that started the modern era was when  Delta bought Northwest in 2008. Regulators said yes. And that opened the floodgates. Just take  a look at these mergers here. By 2015, just four airlines ran about 80% of every domestic seat  in the country. And here's where the story gets crazier. United Airlines CEO Scott Kirby secretly  approached American Airlines about a merger.

[00:05:15]He pitched it to the Trump administration and  then directly to Americans CEO Robert Isam. His whole argument came back to that trade deficit I  talked about earlier. Foreign Airlines are taking American passengers. A combined United American  would be the biggest airline on Earth. The only US carrier big enough to actually go toe-to-toe  with Emirates and Qatar. Now American said no.

[00:05:37]Isim called it a non-starter. He said that it  would be anti-competitive and bad for customers, which to be fair is probably true. The combined  airline would have controlled roughly a third of all US domestic flights. Kirby officially  declared the deal dead, off the table for the foreseeable future. But the fact that he  even tried says everything about where things stand right now. Here's a quick test. Let's  Google the world's top airlines right now. See, Skyras runs the biggest airline survey in the  world. 22 million passengers, 100 nationalities, 325 airlines are ranked every year. Their top  five are Qatar, Singapore, Cath Pacific, Emirates, and ANA. Now, keep scrolling. A US airline doesn't  even make the top 20. First on the list, number 22. This is the highest ranked American carrier  in the world. It's Delta Airlines. Not top 10, not top 15, not even top 20. This is where it  gets complicated and where American Airlines gets really angry. See, Qar Airways, Emirates, Etihad,  what do they all have in common besides dominating every ranking? Their governments own them. Qatar  Airways is 100% state-owned. Emirates is owned by the government of Dubai. Etiad is owned by  Abu Dhabi. So, these are not companies that are trying to please shareholders every quarter, but  they're tools of national strategy funded by oil money and run like national infrastructure. In  2015, American Delta and United got together and published this white paper saying these three  Gulf carriers had received over $42 billion in government subsidies in 2004. That number has  since grown to over 50 billion by their count. The US carriers argument is pretty simple. We have  to actually make money to survive. They don't.

[00:07:13]If Emirates has a bad year, Dubai covers it. If  United has a bad year, they file for bankruptcy.

[00:07:19]And that is not a fair fight. But here's where it  gets awkward because the Gulf Airlines fire right back. They point out that the US has handled its  own airlines massive amounts of government money, too. The entire US aviation industry was built  on about $155 billion in government subsidies between 1918 and 1998. After 9/11, airlines got  $15 billion in direct government transfers. During the pandemic, the US government sent $54 billion  to American carriers to keep them alive. The Gulf carrier's point is this. You took government  money when you needed it. Don't act shocked that we did the same. And honestly, that's a fair  point to make. But here's potentially where the real difference is. US bailouts were emergency  lifelines. They were handed out during a crisis to prevent total collapse. Gulf carrier subsidies  are permanent and structural. Qatar Airways has lost money for multiple years running and just  kept growing anyway because the Qatari government is fine with it. It's building a global hub.  That's different than crisis relief. Beyond the subsidies, there's a really simple reason  Americans pick foreign airlines. The flight is just better. Geography matters. Dubai, Doha,  Istanbul, Singapore, they all sit right in the middle of global longhaul routes. They were  literally built to be global crossroads. Atlanta and Chicago were built to connect American  cities. That's the structural advantage that no merger or airline service can fix. But then  there's the actual product. See, on Singapore Airlines and economy, you get a real good meal. a  decent amount of space, a screen that doesn't ask for your credit card. Business class is a full lie  flat suite. First class is a private suite with a double bed and sliding doors. Now, to be fair, US  carriers have invested real money. United Polaris, Delta 1, American flagship. When those products  are good, they're genuinely competitive, but it's often inconsistent, and inconsistency kills trust.  Okay, but where does this leave the average person booking a flight? Well, one argument goes, fewer  airlines means more stable airlines. the ones that survived are big enough to weather a crisis. You  book a flight from 6 months from now, you want to know that that airline will exist when you show  up at the gate. The other argument goes, four companies controlling 80% of your domestic options  means they don't have to try very hard and they know it. And that's why bag fees went from $0 to  $45. That's why the middle seat is 3 in narrower than it was 20 years ago. Both of these things  are true. Okay, at some point you have to ask, is this still a free market or did deregulation  in 1978 just trade one government cartel for a private one? The Wright brothers invented the  airplane right here in America. We built the most connected air travel system the world had ever  seen. And somewhere along the way, we went from a dozen airlines competing for your business to  four companies splitting 80% of it. Let me know in the comments. Should governments be so involved  in airlines and should they get involved to save airlines or should it be a totally free market and  let whatever happens happen? While you're at it, to help support this channel, make sure you  subscribe so you don't miss the next one.