GAO: American-U.S. Airways Merger Will Reduce Competition

We’ve been following the proposed hook-up/merger of American Airlines and U.S. Airways for what seems like forever, but those two crazy kids aren’t out of the woods yet, so far as approvals go. And a new report by congressional watchdogs over at the Government Accountability Office could play a part in the Justice Department’s review of that marriage. It says if the companies smush themselves together, it’ll reduce competition in a whole lot of airports.

Should the two companies merge into one being, the GAO says that 1,665 routes between cities would lose one competitor, affecting more than 53 million passengers, reports the New York Times. However, a new competitor would show up in 210 routes, affecting 17.5 million passengers.

This is being compared to previous airline mergers (of which there have been more than a few), including the recent United-Continental merger. That holy union resulted in 1,114 routes between cities losing one competitor, the GAO’s report noted.

Despite the fact that there would be a greater loss of competition than the airlines had previously been touting —saying the two carriers only overlapped on 12 nonstop routes — the GAO admits that for the most part, those markets would still have “effective competitors” in affected areas. It also said, however, that on seven of those 12 nonstop routes, there was no other nonstop competitor.

Why is that so important to consumers? Because choice is our weapon — the more airlines there are flying routes to different cities, the greater number of options we have to choose from and the harder those carriers have to work to convince us to buy their tickets.

If everyone is lumped together in only a few airlines, that environment creates an increased chance that airlines will band together to increase prices collectively and institute fees that customers will have no way of avoiding.

As such, members of the Senate transportation subcommittee on aviation are voicing their concerns.

“If this merger is to be approved, it will lead to even more consolidation of the domestic airline industry,” said Sen. Maria Cantwell, D-Wash., the panel’s chairman. “Will this merger mean higher ticket prices, more fees, and fewer options for flights?”

But Doug Parker, CEO of US Airways who will become CEO of the combined airline that will be called American, said travelers will come out with a win if the merger goes through.

“The network is able to provide these choices and services because it aggregates demand that independently cannot support profitable service, but collectively can do so,” he said.

G.A.O. Says Airline Merger Will Reduce Competition [New York Times]


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