Antitrust Institute and BTC Urge Probe of US Airways - American Airlines MergerAugust 8, 2012 By: George Dooley Travel Agent
A merger between US Airways and American Airlines could substantially reduce competition on a number of routes, create regional strongholds at key airports across the country, and starve smaller communities of important air service, a new analysis from the the American Antitrust Institute (AAI) and Business Travel Coalition (BTC) argues.
"A US Airways-American combination poses potential concerns for competition and consumers," said the reports co-author, Diana Moss, vice president of the AAI.
The proposed merger would combine the fourth (American) and fifth (US Airways) largest airlines nationally, making US Airways-American the largest U.S. carrier with a combined share of over 20 percent.
Report co-author Kevin Mitchell, chairman of the BTC, noted, "The legacy mega-merger would complete a troubling transformation of the domestic U.S. industry to four powerful, closed airline systems (American, Southwest, United Continental, and Delta) that would control over 70 percent of the U.S. market."
The 28-page White Paper, which has been sent to the U.S. Department of Justice (DOJ), explains the background that a US Airways-American combination would occur. This includes an industry "marked by a dwindling fringe of low-cost carriers and increasing questions about whether Southwest any longer exerts significant competitive discipline."
The report notes that a DOJ investigation into the proposed merger would be informed by lessons from the effects of previous legacy mega-mergers (e.g., Delta-Northwest and United Continental) on fares, service and choice.
The analysis flags a number of key issues for investigation, including the potential effect of the merger on enhancing the buying power of US Airways-American and the oneworld airline alliance to which it would likely belong.
"DOJ might also focus on the potential adverse effect of the proposed merger on the carriers' incentives to disclose ancillary service fee information," BTC's Mitchell said.
The report also recommends that any claimed cost savings from the merger be carefully scrutinized. "The pandemic of integration problems in other mergers is a warning sign for this transaction," concluded AAI's Moss.
While AAI and BTC do not make a recommendation as to the legality of the proposed merger, their White Paper raises important questions that deserve investigation before a decision is made, the co-authors note.
AAI and BTC provide nine major policy recommendations regarding a US Airways-American merger.
"Our analysis indicates enough smoke to indicate a potential fire and that the merging parties bear a heavy burden in demonstrating that their merger would not be harmful to competition and consumers, " they conclude.