The NYT says that Continental and United Airlines have agreed to a $3 billion merger that will create the world’s largest airline, eclipsing current front-runner, Delta.
The new airline will be called United and will be based in Chicago. United’s CEO will stay on for two years before riding off into the sunset in favor of Mr. Smisek of Continental.
So what does this mean for you, dear consumer? The consensus seems to be higher fares, fewer choices and more fees.
“Airlines are struggling to find a business model that makes sense,” said Scott Sonenshein, an assistant professor at the Jones Graduate School of Business at Rice University. “Consolidation gives them more leverage. As a consumer, you will have less choices, fewer routes, higher prices and more fees.”
The main point of an airline merger is to cut capacity, as there are currently too many seats chasing two few passengers.
The deal isn’t sure to go smoothly, however. The proposed merger will have to undergo scrutiny from the Justice Department’s antitrust division and the United pilot’s union has already said it would oppose the merger.
So that’ll be fun.