From August 8, 2012 - In a jointly produced White Paper released today, the American Antitrust Institute (AAI) and Business Travel Coalition (BTC) review the competitive issues raised by a possible merger of US Airways and American Airlines. The 28-page report can be downloaded here.
The White Paper, which has been sent to the U.S. Department of Justice (DOJ), indicates that a merger between US Airways and American 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 US Airways-American combination poses potential concerns for competition and consumers,” explained the report’s 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 White Paper explains that a US Airways-American combination would occur against an industry backdrop 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 White Paper 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 alliance to which it would likely belong. BTC’s Mitchell noted, “DOJ might also focus on the potential adverse effect of the proposed merger on the carriers’ incentives to disclose ancillary service fee information.” The report 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 Diana 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. AAI and BTC provide nine major policy recommendations regarding a US Airways-American merger, noting that their 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.
Diana Moss, AAI
Kevin Mitchell, BTC
About American Antitrust Institute (www.antitrust institute.org)
The American Antitrust Institute is an independent Washington-based non-profit education, research, and advocacy organization. Our mission is to increase the role of competition, assure that competition works in the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy. Our list of contributors is available upon request to firstname.lastname@example.org.
About Business Travel Coalition (www.businesstravelcoalition.com)
BTC is an advocacy organization dedicated to interpreting industry and government policies and practices and providing a platform for the managed-travel community to influence issues of strategic importance to their organizations. BTC represents the interests of the managed travel community in Washington and Brussels and within the travel industry.