Bigger is not always better when it comes to airline mergers

Updated

Let me finish tonight with this…..

Having recently approved the mergers of Delta and Northwest as well as Continental and United, the Justice Department is creating turbulence for the proposed merger of American and US Airways. And six attorney’s general from diverse states agree, including those from Texas and Arizona, where American and USAirways are based.

One illustration of concern can be found at Reagan National, where the resulting airline would account for nearly 70% of all flights, and control 63% of nonstop flights. That level of consolidation has passengers worrying about rates and routes. The airlines respond by saying that the merger will actually create more options for customers. I’m not holding my breath.

Ironically, it is because of the prior mergers that the American-US Airways marriage is problematic and being challenged: This merger would create the worlds largest airline, and we’d be left with four airlines controlling 80% of the U.S. market for air travel.

There’s a bank analogy to be made here.

Bigger rarely seems to be better.

When I swap travel stories with friends and colleagues, no one seems to single out the giants for good service. More likely is that they’ll reference JetBlue, Virgin, Alaska Airlines - or even Southwest.

Speaking of JetBlue, that airline happens to lease half of its takeoff and landing slots at Reagan from American Airlines, and would therefore be vulnerable if the merger proceeds.

This dispute will probably end before you can put your seats and tray tables in an upright and locked position with a negotiated settlement where the newly consolidated airline has to make some concessions. That seems like the right outcome. The industry would get some needed stability, and where the American-USAirways entity loses routes and gates, it will create the competition that would otherwise be in short supply.

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Bigger is not always better when it comes to airline mergers

Updated