Keep airlines competitive

8/15/2013

In A federal lawsuit filed this week, the Justice Department makes a strong case for why the proposed merger of American Airlines and US Airways should be blocked under antitrust laws.

The deal would create the world’s largest airline, reduce competition, and undoubtedly lead to higher fares and fewer flights. The two airlines have more than 1,000 overlapping domestic routes and together control most of the traffic at important airports such as Dallas-Fort Worth International and Ronald Reagan National near Washington.

The Justice Department estimates that consumers would pay hundreds of millions of dollars more in fares and fees if the airlines merged. The airlines argue that the deal would allow them to better compete against United and Delta, which have dominated the industry after merging with other airlines.

But American and US Airways have it backward. Those earlier mergers are precisely the reason this consolidation is a problem. Fares and fees have increased across the industry, and especially on routes where mergers reduced competition in the past five years.

Since 2008, Delta merged with Northwest, United combined with Continental, and Southwest took over AirTran. Another merger would concentrate power in four big carriers, down from five.

Mergers have also increased the dominance of the big carriers in their hub airports. Not surprisingly, the attorneys general of Arizona, Florida, Pennsylvania, Tennessee, Texas, Virginia, and the District of Columbia — most of which have airports with a large number of American or US Airways flights — have joined the Justice Department lawsuit, knowing the merger would hurt consumers in their states.

US Airways has been an aggressive discounter on routes where it only offers connecting service, to attract business away from carriers with nonstop service. That would change if it joined with American.

Recent mergers have made airlines bigger and more profitable, but have left travelers with fewer choices and higher fares. There is little regulators can do to reverse those trends, but they can make sure the competition that still exists is not further weakened.

— New York Times