More Airlines Means Lower Prices

How Airline Competition Helps Consumers

Imagine that you happen to have a ton of vacation time and are planning a trip. You want to fly somewhere cheap, but where should you go? Well, according to a new study, air routes that are served by the highest number of carriers also tend to be the cheapest. So when trying to book your vacation, it may make the most sense to fly between large airports that are served by several carriers. Here is the chart that explains how the number of airlines effects prices per mile.

A Travelers Dilemna

While this chart is great news for someone living in say New York, what does it mean for people from smaller cities? Typically we think that larger cities like New York, Chicago and Boston have high costs, but when it comes to air travel the opposite tends to be true. If you are a frequent traveler, you may actually spend much more money if you live in Burlington, Vermont than if you live in Boston. For domestic flights, small airports with few routes can be almost five times as expensive for flights from large airports! 

In theory, this would suggest that we should, as a society, build large airports or no airports at all. Rather than trying to serve all small metropolitan areas with airports, we should theoretically consolidate power into mega-airports in order to further reduce prices. The only problem with this is that it would shut many people out of the market. If for example we did shut down the airport in Burlington, Vermont, people who lived here would be stuck. The closest large airport would be nearly 5 hours away in New York City. That's no good, at least not for now.

A Transportation Solution

The issue comes down to a matter of travel efficiency. For long trips, say more than 500 miles, it makes sense to travel by plane because it saves the most time. But say you need to travel only 250 miles. The optimal trip in this case it to take a high-speed train because the time that you would save from not passing through security at an airport would make train travel faster. So in our theoretical model of small airports, Burlington should shut down it's airport and those wishing to travel a long distance should take a high-speed train to New York and then fly to their destination. 

So in reality, the issue is that there are not enough trains in America. Unless you are traveling between Boston, New York and D.C., nobody wants to travel by train because there are no trains. If however, we were willing to invest in reasonable public transportation by means of train, we could save travelers tons of money by not forcing anyone to fly out of small airports for "convenience."