Today American Airlines and its betrothed, US Airways had to defend their proposed merger in front of a Senate hearing and several consumer advocates. Citing higher fares, reduced service to smaller communities in the U.S. and a loss of competition among carriers, opponents of the impending nuptials testified at a Judiciary Committee hearing that such a joint venture would hurt consumers.
CEOs for both airlines — Doug Parker of US Airways and Tom Horton of AMR (American Airlines’ parent company)— were kept busy assuring members of the legislature that their coupling would be a good idea, even though it would leave only three major U.S. carriers with domestic and international routes.
Senator Amy Klobuchar of the antitrust subcommittee said the panel has to review what the merger would mean for rural areas, baggage fees and other airline charges, as it would mean “four top airlines controlling nearly 80%” of domestic air traffic, reports Bloomberg.
“With fewer competing airlines can we expect even more of these charges?” she said. “We need to know now that fewer airlines won’t mean fewer flights and fewer services.”
There are low-cost carriers like Southwest Airlines and Alaska Air to keep competition flowing, the two CEOs replied. So, there’s that.
Sen. Charles Shumer was worried about his constituents, using a bit of wordplay to make that clear: “The consolidation should only be cleared for takeoff if we can be sure it would not mean higher fares or poorer service or reduction in New York jobs.” Takeoff! Get it?
Parker replied: “We have no intention of reducing service.” Key word? “Intention.”
Despite the airlines’ reassurances, Consumers Union, the advocacy arm of our elder, wiser siblings at Consumer Reports, also made sure to weigh in on what the group sees as a bad idea for travelers.
“We are concerned that the proposed merger between American Airlines and US Airways has the potential to further deprive air travelers of healthy, robust competition, and to further deprive communities of being part of a vibrant air transportation network,” said Consumers Union’s travel and aviation consultant, William McGee.
He also noted before the hearing that every time there’s a mega-merger in the airline industries, companies promise that “competition will be enhanced and consumers will be better served, and each time this has not happened.”
His voice was joined by Diana Moss, vice president of the American Antitrust Institute.
“The proposed deal raises significant competitive issues that could result in harm to consumers,” she explained.
The hearing today was at the request of the Justice Department’s antitrust division, which had sought more information from the companies on the proposed merger. Before the two companies can make it to the altar, they’ll also have to get approval from AMR’s bankruptcy judge as well as US Airways shareholders and federal regulators.