U.S. airlines have been in a near-constant state of evolution since the industry was deregulated in late 1978. Startups, mergers and failures have created an industry reaching a new normal following the devastation of the pandemic. When one of the major US airlines has an operational mess, as Southwest did at Christmas, it makes national news and the federal government gets involved. The industry is now overly dependent on four airlines that collectively carry over 60% of all domestic passengers and 80% if we include US passengers flying internationally.
This reminded me of the iconic board game Monopoly. In this game, players invest in real estate and utilities to block others and make the most money. I thought it would be fun to see how US airlines would match up on the traditional board, meaning how valuable each airline or sector is to hold today. I hope this is a good starting point for those thinking about real competition.
Delta owns the Yellows and Greens with hotels
Delta has about 15% of all US domestic traffic, placing it between American and United. But Delta also has a larger share of traffic in the markets they control, and it does so better than its competitors. So giving them the colors yellow and green gives them the two highest value locations, with three properties. Both the yellow and green landing chances are increased by the cards as well. Players who can monopolize both of these colors tend to do well in the game.
Delta also owns hotels at all six properties. That makes it particularly damaging if a competitor lands there, but equals its strong S-curve position in Atlanta, Detroit, Minneapolis, New York and Seattle. The S-curve refers to the fact that among business travelers, those with a seat share of 60% or more tend to earn nearly 100% of business travelers. This is because of the breadth and depth they can serve, which in all of these Delta cases is well ahead of the number two in each market.
The American owns the Reds, Orange, and The Light Blues
American carries the most domestic traffic at close to 20%. During the pandemic, they took advantage of this by keeping relative capacity higher than most as the US recovered faster than international markets. Pairing them with the reds, oranges, and blues gives them the most real estate, but the value isn’t as high as Delta’s. If you had to get more specific, in Charlotte’s home it would be the reds, a good set of properties, again with some card support. Dallas would be the oranges, a big city but with a big Southwest operation at nearby Love Field that keeps domestic prices in check. Miami, domestically, is light blue at best, as nearby Fort Lauderdale is home to all the low-fare that serves south Florida. JetBlue’s Mint product has brought more competition to intercontinental business traffic from South Florida.
It’s just that these two airlines already occupy much of the board. American has hotels in red, which align with their strong presence in the Charlotte program, and three homes in each of the blue and orange properties. This is due to the low-cost competition they face at two of their major hubs, which Delta has largely managed to avoid.
United owns The Light Purples, Boardwalk & Park Place and Free Parking
Among the big four US airlines, United has the smallest share of domestic travelers at just over 12%. But they also operate a large hub at Newark Airport, which gives them access to a huge pool of both business and leisure traffic. That’s why they get the light purple ones, the first set of properties on the second side of the table from the Go space. But they also get two of the most valuable real estate pairs on the board, the dark blues of Boardwalk and Park place. With only two properties versus three for most others, this reduces the chances of landing, but there is the infamous “take a ride on the boardwalk” card that can elicit cheers or grimaces when pulled. When my son and I play the “draft hubs” game, Newark is almost always the number one pick.
Free Parking is a space that according to the original rules means nothing happens and in the actual game no one can actually own that space. But a popular variation is to put fees not paid to another player in that space and the person who stops there collects them. Recognizing that some will play the game that way, giving United that space, they matched their predicament in Denver and the contested hub at Washington’s Dulles Airport. Sometimes these positions undoubtedly pay off for United, while at others they may not come close to covering their cost of capital. Free parking makes sense that way.
Southwest owns All Four Railroads Plus Waterworks
Southwest has a larger domestic market share than all but American. Carrying nearly 18% of all US traffic, they have only recently expanded to nearby international destinations. International flights were not a serious consideration at Southwest until they bought Airtran in 2011. High frequency and reliable service between many cities make them popular for families and small business travelers. The railroads on the monopoly board are the unique properties on each of the four sides and are enhanced with the “take a ride on Reading” card. They also double in value when all four are owed, which is hard to do in the game, but Southwest has essentially done it in the US
Added to the railways, they also get hydraulic works. One of two utilities on the board, Waterworks is a low-cost investment that pays off repeatedly through the game. You can’t win with Waterworks alone, but when added to all four rails it creates a powerful competitor that is a threat in all geographies (and on all sides of the board).
Low cost airlines own Dark Purples, The Electric Company and The Jail
Every other full-size jet passenger airline in the US, namely Alaska, JetBlue, Frontier, Spirit, Sun Country, Allegiant, Breeze and Avelo, is vying for the deep purples of Mediterranean & Baltic and Electric Company . The cheapest real estate on the board, dark purples aren’t expensive to buy or develop, but they don’t offer enough consistently profitable returns to keep a player competitive. Added to these are the Electric Company, the second utility in the game. Like Waterworks, it helps to have it, but it’s best to have both if you can. Collectively carrying less than 40% of all US traffic, with no airline even approaching 10%, none of these airlines can effectively contend with the real estate weight of the big four.
The prison site shuts down the low-cost carrier’s operations. While in the actual game no one can own the prison, it represents the fact that these carriers are often blocked or jailed from the real estate needed to be truly competitive against their much larger competitors.
The remaining spaces and final thoughts
The other spaces in the table, such as the Chance and Community Chest cards, luxury tax and income tax spaces are owned by the US government. They tax the industry in many ways, including excise taxes on fuel and tickets, standard corporate and payroll taxes, and fees added to each ticket to cover airport security. They also create policies to seemingly improve competition and improve customer service, so random card draws make sense for that.
This mapping only considered US domestic travel. If you were to add in the sometimes extensive international networks of US companies, you would get a very different picture. United would become relatively larger while American would become relatively smaller. The big four will approach 80% of all US-based traffic. Low-cost airlines would be limited to only nearby international destinations such as Mexico, the Caribbean and North South America, and thus would be further behind.
(tags For Translation)Monopoly