DOJ Move to Block AA - US Airways Merger Wins BTC Approval

business travelerThe Business Travel Coalition (BTC) responded "very positively" to the U.S. Department of Justice (DOJ) and six State Attorneys General decision to sue to block the proposed merger between American Airlines and US Airways

"DOJ'’s legal complaint states: “In recent years the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a high price.” DOJ shines a spotlight on how uncompetitive and cozy U.S. airlines have become, " BTC said.

“BTC noted it had testified in Congress regarding the merger on February 26, 2013, and in both its written and verbal testimony it argued that "there is a coordinated airline war on consumers and price transparency."

"“Airline CEOs testify that the fare transparency and comparison-shopping enabled by the current system, and especially the online travel companies, will be more than adequate to protect competition and consumers from the consequences of radical industry consolidation," said BTC Chairman Kevin Mitchell.

"They justify their mergers on fare transparency in one breath, and then turn to kill it off by withholding fees for ancillary services from travel agencies in the next breath, or by attempting to impose a new anti-competitive system for the worldwide pricing of tickets, as embedded in the International Air Transport Association's Resolution 787," said Mitchell. 

The International Air Transport Association (IATA) is the worldwide trade association for airlines and represents 240 carriers accounting for 84 percent of worldwide passenger traffic, BTC noted. Resolution 787 is an agreement among all those airline competitors that includes a radical change in how tickets would be sold. 

Under Resolution 787, fares would no longer be published and available for any and all consumers to comparison-shop anonymously so they can find the best fares, BTC said.

"Instead, under the new model that IATA is spearheading, airlines would determine the price depending on exactly who is asking, and the Resolution calls for consumers to surrender very intrusive information to get fare quotes, including their name, the purpose of the trip, age, marital status, nationality and past purchasing behavior," BTC said. 

"The Resolution is meant to supplant the current fare transparency that has benefited consumers with a regime of fare shrouding so that airlines can take up fares and fees even further," BTC said.

"The complaint of DOJ and the States highlights a number of statements by US Airways’ executives confirming that the past consolidation in the airline industry has already conferred on airlines the power to impose higher prices and new and higher fees," BTC's Mitchell said. 

"To ameliorate the harm to consumers that flows from this airline pricing power, and in fact to prevent even more grievous injury to consumers in the future, the U.S. Department of Transportation (DOT) should promptly reject the pending request by IATA for approval of Resolution 787.  DOT should also proceed promptly to issue its long pending rule on disclosure of airline fees and charges and require airlines to make full, fair and timely disclosure of their extra fees and charges through all outlets that they have agreed can sell their tickets, " BTC said.

A joint BTC/American Antitrust Institute analysis of the proposed merger can be found at http://btcnews.co/1684c3A.

 

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