Blame government, lack of competition for soaring airfares

Back when the COVID-19 pandemic was in full swing, my girlfriend at the time (now my wife) and I saw a world in disarray, but also noticed some opportunities. Millions of people sheltered in place—as demand for flights and hotels flagged—and after a little discussion, we decided to take some calculated risks.

We were both avid travelers long before COVID-19 and wanted to continue exploring the world. After some analysis, the way we saw it, the risk of us dying from COVID-19 while traveling was low and the chance of having a really good time was high. So we packed our bags. From Christmas of 2019 to May of 2024, we visited 25 countries (some countries more than once) sprinkled across the globe, including the Middle East, Central America and Africa, not to mention a host of states.

Thanks to lack of demand, flights were initially super cheap. An April 2020 USA Today article gushed over the low prices: “How cheap is it to fly this month? Almost impossibly cheap. I […] found a $35 fare from Los Angeles to Fort Lauderdale.” However, as the pandemic petered out, demand soared. Now prices are astoundingly high, but don’t solely blame your fellow jet-setters. Government regulation and lack of competition help drive up costs.

“Since 2021,” USA Today noted, “the average price of a roundtrip ticket has increased 29%, meaning people are paying $86 more than they were just a few years ago.” That even outstrips the inflation rate. The average domestic airfare out of Atlanta now stands at $403.55, and international flights are obviously much more—and becoming increasingly expensive.

Consumers also have fewer choices. “Today, four airlines—American, Delta, United, and Southwest—control 80% of the [U.S. domestic] market and the airline industry is smaller and more concentrated than at any time since 1914,” according to Time Magazine. While these four behemoths compete vigorously against each other, this concentration has resulted in higher fares and fewer options.

This stands in stark contrast with Europe. As anyone who has traveled within that continent knows, flights are mostly dirt cheap there. Right now you can purchase a flight from Paris, France to Lisbon, Portugal for $37 and Rome, Italy to Budapest, Hungary for $36. “The largest single reason for lower airfares in Europe is the presence of competition,” asserts Chris Loh of Simple Flying. “The open skies agreements established in the European Union mean that European airlines can fly between EU countries freely.”

Europe not only permits, but seems to embrace, airline competition for extra and intra-continental flights. This competition drives down prices, but to be fair, Europe boasts some other benefits that aid consumers’ pocketbooks. A complex rail system competes with airlines, high population density in well-placed airline hubs limits costs and some smaller airports enjoy subsidies.

Meanwhile, the United States government restricts competition. “U.S. laws prohibit foreign airlines from operating domestic flights,” writes the Washington Post. As economists understand, if the government permitted more competition, then prices would benefit consumers.

The feds also find other ways to jack up prices. On my last flight to Washington D.C. in December, there were nearly $70-worth of fees and taxes, which is twice as expensive as some European flights. These range from sales taxes, security fees and ambiguous government charges that will leave you utterly confused as to their purpose.

The government levies other costs on the airlines too thanks to rules and regulations. In fact, the industry must deal with numerous agencies, including the Federal Aviation Administration, National Transportation Safety Board, Transportation Security Administration and so forth.

I am not some anarcho-capitalist zealot. When you are soaring seven miles in the air inside of a metal tube, you come to appreciate some government safety regulations. Likewise, I don’t believe all taxes are bad, but our government has probably gone overboard with airline taxes and regulations, which—in part—leaves us with inflated airfares.

If we want to see the airline industry thrive with the current post-pandemic demand, then the path forward is simple—at least in theory. The government needs to foster more competition and seek ways to responsibly lower the tax and regulatory burden facing travelers and airlines alike.

It’s not apparent that the incoming Trump administration is planning any big moves, but Delta CEO Ed Bastion said its approach to regulation is a “breath of fresh air.” Trump’s plans aside, if the government were to take a more European approach, then travelers across the nation, including my wife and I, would have a very happy New Year.