Convergence of Operating Practices

The overall result of these changes in the legacy carriers’ structure is to make them look more like the low-cost carriers with which they have com­peted under deregulation. Not only are the legacy carriers structured more like the LCCs, they are beginning to adopt their operating practices as well. The lower fare structure of the new legacy airlines removes a major advantage previously held by the low-cost carriers. At the same time, the low-cost carriers are beginning to look more like the legacy carriers, causing a convergence between the two groups as they pursue the airline traveler dollar under a maturing deregulated air transportation sys­tem. The third group that makes up what comprises the majority of the domestic air transport system, the regional carriers, have also gone through a transformation as these changes roll downhill.

While the DOT classifies airlines as “majors” (20), “nationals” (33), or “regionals” (31) based strictly on revenues, this classification is not help­ful in differentiating between the actual functions of the various groups. For instance, American Eagle is classified as a “major” airline due to its revenue, but its operations conform to what a regional or feeder airline does. A more practi­cal classifying of airlines would separate them into legacy (or network or incumbent) airlines, low-cost carriers (LCCs), and regional airlines. By now, we know that the legacy airlines are the surviving car­riers that operated during the period of CAB regu­lation; the LCCs are the “no frills” airlines that are either new entrant airlines (since 1978) or airlines that operated wholly intrastate during the CAB period; and regional airlines are those airlines that now operate as feeder airlines, mainly to the legacy carriers. Legacy carriers and LCCs are sometimes referred to as “mainline” carriers. A fourth group of carriers, not discussed here, are “commuters” (61), which operate aircraft of 60 or fewer seats or have a maximum payload of 18,000 pounds or less.

XI The New Legacy Airlines

As a result of the bankruptcies and mergers of the legacy carriers beginning in 2002, this group of airlines has emerged as viable contenders with the LCCs. The new legacy airlines are United, Delta, US Airways (before the pending merger with American), and American Airlines. Dur­ing the first decade of the 21st century, these airlines (representing also the absorbed Conti­nental, Northwest, TWA, and America West) contracted their networks, route miles, number of employees, and number of aircraft, while focus­ing on down-sizing, cost-cutting, and improving productivity.

They began to emphasize Internet ticket pur­chasing and distribution and web check-in. These newly oriented carriers began to mimic other LCC practices by eliminating or reducing ser­vices and amenities that had come to be standard as the legacy brand, such as meals, soft drinks, snacks, and pillows.

By 2008, these airlines began to levy fees, in addition to the base airline fare, for services and amenities that had always been complimentary to their passengers. These add-on fees include, depending on the airline, ticket change fee, ticket cancellation fee, booking fee for phone or in per­son, seat selection fee, unaccompanied minor fee, pet in cabin fee, fees for checked bags, oversized bags, and overweight bags, early boarding fee, seat selection upgrade fee, wireless Internet fee, blanket and pillow sets fee, inflight entertainment fee, and inflight food and beverage charges. See Figure 35-23 for a depiction of select fees and the locations where offered for purchase. See

Tables 35-3 and 35-4 for a listing of airlines and airlines’ imposed fees for optional services.

The legacy carriers have, however, main­tained business and first class services, which render much higher yields than standard. The legacy carriers also have the advantage of flying more profitable international routes as a result of global deregulation and Open Skies agreements.