The Economist has an article about this subject, too:

"But a new paper by Jose Azar, Martin Schmalz and Isabel Tecu argues that trustbusters now need to look in a new direction: at concentrated ownership. If, for instance, a mutual fund owns shares in two rival companies in the same industry, it would not be in their best interest as shareholders to encourage them to act in a competitive way. The boss of Delta Airlines might propose a price war to boost his business. But would a mutual-fund manager who also owned shares in United Airlines be supportive? And would company managements be as keen to cut prices and fight for market share if they knew that their shareholders did not want them to?

Mssrs Azar, Schmalz and Tecu find evidence for exactly this in the airline industry. Including levels of common ownership in conventional measures drastically increases market concentration to more than ten times the level authorities say would be "likely to enhance market power"."

Bottom line: it looks like there should be competition, but maybe there isn't due to ownership structures.

It really depends on the route. Personally, I live in Chicago, which means I have lots of options going to midsized and large airports, and prices can be very competitive.⁰ Small airports are often served only by one of the three airlines with a large presence here (United, American, Southwest), and it's these routes that have higher prices. In the past, I've taken 13 hour (overnight) Megabus trips instead of <2 hour plane trips just because United's prices on some small monopoly route or another were so outrageous. For those who live in a town or city with few options like that, airline travel is a lot more expensive than it is for us lucky ones in hub cities, takes a lot longer because of transfers, and is a lot less flexible with flight times and such. This is a factor behind a lot of corporate HQ relocations to big cities, as well.

⁰ I actually recently bought a roundtrip to Denver for $32 fully inclusive of taxes and fees. Granted, it's on Spirit, which is only marginally better than the bus, but can't beat the price.

I would argue that there is _effectively_ lack of competition in the airline industry, (at least in the US):

- there are ~ 6 major airlines for a country of 320 million people. In Europe, there are many more (all the national carriers, plus lots of low-cost airlines)

- where are the low-cost carriers (like EasyJet or RyanAir)? JetBlue or SouthWest are not really low cost, they just have marginally better service than the old guard.

- customers are treated like dirt. Not just the ever-smaller seats and lack of any free food on domestic flights. It is even worse than that - they can change the agreed-on contract at any time, example: I paid extra $$ for a non-stop ticket LAX-BOS in June. A few days ago, I received an email form the airline apologizing for changing my ticket to a non-direct flight (which will take 3-4 hours longer), but there is no mention of any refund whatsoever.

Is that really true? Sure there are plenty of airlines, but I find they don't all compete head to head. For a given region or set of source/destinations, it seems to me you get only around 3-4 carriers which actually fly.

I've been looking at fares from DC to Rome and DC to Edinburgh. In both cases, there were MANY options... United, Aer Lingus, Turkish Airlines, Lufthansa, WOW, Iceland Air, Delta/KLM.

I also had to book return tickets from DC to Denver. Fewer choices domestically, but still Southwest, United, and Frontier.

Airline competition is local. When I lived in Denver I had tons of choice and prices were low. Now that I live in a smaller city, I have fewer choices and prices are higher. Jet Blue finally came recently and caused prices to drop across the board. But, if they leave I'm sure prices will go back up.