America West took over US Airways, which then took over American Airlines. American and US Airways had each been the combination of several carriers after mergers and acquisitions. And overall the US industry now has 3 large legacy airlines.
And yet the President of American Airlines, Robert Isom, consistently complains about lack of competition – when he is the customer. Back in February he even threated to start his own airline catering company because he’s frustrated by the only two large caterers he’s able to choose from for American.
He told employees in a Dallas Fort-Worth forum on Friday that “the catering industry has gotten really lazy.” He says,
[T]here’s been two companies, Gate Gourmet and SkyChefs, that have basically had a duopoly on the business. And they’ve taken up real estate and facilities and trucks and whatnot, and in most places you have a choice of one sometimes you have a choice between the two and a little bit of competition.
American Airlines is so big, we can’t just go ahead and say we’re comfortable blaming the suppliers. At some point in time if the suppliers can’t do it, we’ve got to figure out a way to do it ourselves. That is something we’re thinking about all the time.”
If You Want a Decent Meal Flying American Airlines Domestic First, Order a Special Meal
Isom then says American isn’t on the verge of starting a new catering company. Ironically SkyChefs was itself started by American Airlines. However he says they plan to “encourage new entrants into the marketplace.”
American isn’t encouraging new entrants into the domestic airline marketplace indeed they’ve lobbied to limit flights to the US by foreign airlines (and foreign airlines aren’t permitted to operate flights between two US cities at all today).
He blames low wages at caterers for high employee turnover rates and notes low profits. He thinks that takes a toll on catering. Nonetheless these seem caterers are able to offer higher quality product to international airlines, and smaller caterers can be used as well (indeed American does cater some premium-heavy flights through other companies).