Delta (DAL – Get Report) is taking Hillary Clinton to task for her views on airline pricing.
In a column on the Web site Quartz, Clinton wrote that capitalism isn’t working and cited examples: pharmaceutical companies raising prices by 5,000% overnight and gouging patients, high-speed broadband pricing that is far higher in the U.S. than elsewhere, and airline fares that have not fallen despite oil price declines.
What’s wrong with this list? Ben Hirst, Delta’s executive vice president for corporate affairs and special counsel, said airlines shouldn’t be included because fares have declined relative to inflation for years and today are 7% lower than they were a year ago.
It is one more case where Delta, far more than its peer airlines, is willing to speak out on political issues. Delta’s positions have been all across the political map, from supporting President Obama’s position on immigration and supporting gay rights to opposing unionization and seeking changes at the Export-Import Bank.
In the column, Clinton wrote: “Over the past year, oil prices have fallen from over $100 a barrel to under $50, and the price of jet fuel has dropped more than a dollar per gallon.
“But the four major airlines — down from 10 airlines just 15 years ago — are charging as much as ever for tickets, even as they hit travelers with extra fees, for everything from checking a suitcase to picking a seat when they fly home at the holidays,” she said.
Clinton decried corporate consolidation, noting that two-thirds of public corporations operated in more concentrated markets in 2013 than in 1996, that “declining union membership means workers have less bargaining power to improve wages and benefits,” and that “additional corporate revenue is going to stock buy-backs and executive bonuses.” She promised to beef up anti-trust enforcement, among other steps.
Hirst responded Tuesday on Delta’s Web site. He said that Clinton “is correct when she writes ‘It’s good for our economy when companies prosper by innovating, creating new products, and investing in their workers.’ But she is wrong to use the airline industry as an example of where that’s not what’s happening.'”
Not only are fares 7% lower today than they were a year ago but also in 2014 airfares averaged about $400 including fees, down $50 from the average fare 15 years ago, adjusted for inflation, he said.
Moreover, 15 years ago, the airline industry was not financially viable, he said.
“The fragmented airline industry of 15 years ago not only produced higher fares for consumers. It led to $65 billion in airline losses over the next nine years, and 142,000 lost middle-class jobs,” Hirst wrote. “Strapped for cash, airlines were unable to invest in customer service and the flying experience suffered.”
But now, he said, thanks to mergers, “the large airlines are more competitive, more innovative and better employers. Delta’s profits last year enabled over $3 billion in profit-sharing and retirement contributions for our 80,000 employees. Industry employment has steadily increased since 2010.” Also, airlines are investing billions in new aircraft and improved technology.
“Concentration may be a problem in some industries, but airline mergers brought financial stability to an industry which desperately needed it,” Hirst said. “Thanks to consolidation, at Delta we are doing exactly what Secretary Clinton prescribes for American business — innovating, creating new products and investing in our workers.”