The transatlantic aviation market, the world's largest and most valuable long-haul market, appears competitive with many airlines and routes. However, major airlines operate as cartels, colluding on prices, schedules, and routes under legally approved joint ventures. This reduces competition and keeps fares high, with regulators allowing this collusion citing public benefits. Three main joint ventures control 75% of flights from New York to Europe, severely limiting consumer choice.
Europe and North America are the two most culturally and economically interlinked continents in the world. Yet, an ocean stands between them. Every year, millions of people travel across the North Atlantic for work, family, or leisure, making it the largest and most valuable long-haul aviation market globally.
At first glance, the transatlantic market seems highly competitive. For example, at JFK airport, one can see dozens of European airlines operating flights. There are 33 different airlines flying 126 routes between New York and Europe, including major carriers like British Airways, Air France, and KLM, as well as smaller airlines such as Air Serbia, High Sky, and Azores Airlines serving less common destinations.
This variety suggests a healthy competitive landscape. However, a closer look reveals a different reality.
If you want to fly to Brussels, you might see options like a 6:10 p.m. departure from JFK on Brussels Airlines or a 6:30 p.m. flight from Newark on United Airlines. Despite the different airlines and airports, the prices are almost always identical. This is because these airlines are effectively acting as a single entity.
For instance, Brussels Airlines and United Airlines collaborate closely, as do Lufthansa and United for flights to Munich. They coordinate flight frequencies, destinations, and crucially, ticket prices. This coordination is a form of cartel behavior—not a drug cartel, but a business cartel.
The airlines involved, including Brussels Airlines, United, Lufthansa, Swiss, and Austrian Airlines, pool their transatlantic revenues and distribute earnings according to joint venture agreements. This means it does not matter which airline a passenger flies with; the revenue is shared equally among the partners.
From a competition economics perspective, these five airlines operate as one, eliminating true competition on pricing.
According to Article 101 of the Treaty on the Functioning of the European Union, agreements that fix prices are prohibited. Yet, these airlines openly admit to price fixing in discussions with investors. Normally, such behavior would lead to legal consequences.
However, the European Commission has granted these airlines an exemption from antitrust laws, effectively legalizing their cartel. European and American regulators have allowed this collusion, arguing that it benefits the public.
There are three major transatlantic joint ventures:
Together, these three entities operate about 75% of all flights from New York to Europe. In smaller markets like Washington D.C., their control is even more pronounced, covering 85% of transatlantic flights, with plans to increase to 89%.
The U.S. Department of Transportation (DOT) grants antitrust immunity to airlines if the public benefits outweigh the harms of reduced competition. Airlines argue that their joint ventures create meaningful competition against dominant alliances, such as the American Airlines and British Airways partnership on the U.S.-U.K. route.
For example, Delta has argued that its limited flight frequencies and inconvenient schedules have led to poor market share in premium business travel on the New York to London Heathrow route. Business travelers, who pay higher fares and book last-minute, prefer flights that fit their schedules precisely.
By collaborating, airlines claim they can offer better frequencies and schedules, which supposedly benefits consumers.
Despite these claims, the collusion means consumers face limited choices and higher prices. The airlines' joint ventures reduce incentives to compete on price or service quality, as revenues are shared regardless of which airline carries the passenger.
This situation is especially problematic in markets outside New York, where fewer airlines operate, and joint ventures dominate even more.
While the transatlantic aviation market appears diverse and competitive, it is largely controlled by a few airline cartels operating under legally approved joint ventures. These cartels fix prices and coordinate schedules, limiting true competition and keeping airfares high. Regulators justify this by citing public benefits, but the impact on consumers is significant, with fewer choices and higher costs for transatlantic travel.
Understanding this dynamic is crucial for travelers and policymakers aiming to improve competition and affordability in one of the world's most important aviation markets.
