A new report by a Wall Street analyst showed that despite consolidation competition in the airline industry has increased in terms of the amount of capacity airlines devote to competitive routes.
Perhaps the best example of the trend is at Los Angeles International Airport, where more than 50% of airline capacity -- measured by available seat miles -- is allocated to routes with three airlines or more, according to the report by Stifel analyst Joseph DeNardi.
An exception to the trend is Charlotte Douglas International Airport, where legacy carriers provide about 95% of capacity and hub carrier American (AAL) provides more than 90%.
In the report, issued May 25, Joseph DeNardi looks at the number of airlines that compete on each route between the first quarter of 2005 and the third quarter of 2017.
"No matter how we decided to look at the data, we generally found that on average there are more competitors in individual markets now compared to five to 15 years ago," DeNardi wrote.
"What is clear is that the share of ASMs being flown by multiple airlines has steadily increased in recent years while the number of 'monopoly' ASMs has steadily declined," he said.
In the third quarter of 2017, the report said, 35% of capacity was dedicated to routes with one carrier. Another 35% went to two-carrier routes and 30% had three carriers or more.
In the first quarter of 2005, 40% of all available seat miles was dedicated to routes with just one carrier, the report said. Another 35% of capacity went to two carrier routes, while 25% had three carriers or more.
In other words, the percentage of capacity dedicated to routes with just one carrier has declined, while the number dedicated to routes with three or more carriers has increased. The capacity decided to two-carrier routes has remained constant at 35%.
The trend is beneficial, DeNardi said, because it weighs against any effort to re-impose airline regulation; it shows that airlines can be profitable even in a competitive environment; and, "ultimately, we believe it supports further consolidation in the industry -- certainly not among the Big 4 but below that, and see Alaska and Spirit as the acquirers."
DeNardi said it is natural, in a hub system, for a large percentage of routes to be served by a single carrier. For example, he said, only Delta (DAL) flies Atlanta-Montgomery, Ala., but, "Other major carriers serve Montgomery through other hubs so the level of competition serving the Montgomery market is greater than would show up using this analysis."