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BTC Questions Proposed US Airways, American Airlines Merger

April 23, 2012 By: George Dooley Travel Agent

The Business Travel Coalition (BTC)  urged the U.S. Department of Transportation (DOT) to study the consequences of recent airline mergers in light of US Airways' (US) announcement last week that it is aggressively pursuing a combination with American Airlines (AA).

BTC said the DOT study should consider the rapidly changing commercial air services marketplace and heed input from the travel industry.

"A rational case can be made that such a merger would lead to higher prices, less mid-size community service and more onerous consumer-facing airline policies," BTC said. "An equally coherent argument is made by some experts that disallowing the merger - after approvals of the new Delta and United - would eventually lead to US and AA being squeezed out of the market ominously leaving the U.S. with a national network-carrier duopoly." 

There is no disputing that consumers, corporations and the country as a whole require a financially viable air transportation system, BTC said."Airlines are the one unique industry that virtually all other industries depend upon to service their own customers and grow their businesses and industries. There is also little doubt that recent consolidation has enabled most airlines to navigate through a volatile jet-fuel pricing environment and somewhat repair balance sheets. "

"Conversely, industry consolidation - in conjunction with the economic imperatives of U.S. immunized global airline alliance partners to flow only the highest-yield traffic over U.S. hubs into alliance networks - has helped lead to a material reduction in service to mid-size communities. These communities, and the regions in which they exist, heavily depend upon connectivity to important U.S. and global business centers that only commercial air service can provide in support of economic growth and job creation."

Another pernicious effect of airline industry concentration is the ability of airlines to ignore the demands of their most valuable customers, BTC says. "For example, since 2008, when U.S. airlines began to aggressively unbundle their product and offer ancillary services, despite corporate buyers' substantial purchasing power and calls for ancillary fee transparency, airlines have refused to provide this fee information in a salable format to the marketplace."

BTC Chairman Kevin Mitchell said a critical determination is how much more consolidation is workable without loss of competition in the marketplace.

BTC said it believes DOT should undertake a thorough assessment of the promises, economic analyses and statements provided to the U.S. Congress, Department of Justice (DOJ) and State Attorneys General from recent airline-merger participants and compare what was presented with what the actual outcomes have been.

The study should be done well in advance of Congressional hearings on a proposed US-AA merger, BTC said, and assist all travel industry stakeholders to understanding the risks and  rewards of consolidation.

"The domestic U.S. and global aviation marketplaces are vastly different from what they were in 2000 and this new marketplace reality needs to be better understood by policymakers and regulators alike," BTC's Mitchell said.

BTC said it will immediately initiate due diligence with airlines, labor groups, analysts, corporate travel managers, travel management company executives and consumer groups with respect to the proposed US-AA merger.

BTC noted it had testified in Congress and has generally opposed domestic U.S. airline industry consolidation -  including the 2000 US Airways/United Airlines, 2006 US Airways/Delta and 2008 Delta/Northwest Airlines proposed mergers. Two of three
of those merger attempts were blocked, BTC said.


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About the Author

George Dooley
George Dooley, Travel Agent’s senior contributing editor covering retail and technology, has a long-standing reputation as one of the top travel industry journalists. He notes...

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By George Dooley | April 23, 2012
The merger may face tough scrutiny from industry and DOT.
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