Tue March 19, 2013
US Airways, American Merger: A Monopoly Or Not?
The CEOs of American Airlines and US Airways defended their proposed merger Tuesday before a congressional anti-trust panel. Framing the creation of the world's largest airline as anything other than a monopolistic move requires careful wordsmithing.
To follow the argument from American Airlines CEO Tom Horton, you need to put aside conventional wisdom that having fewer companies in a marketplace leads to anti-competitive behavior.
"We think this enhances competition and that it creates another global airline on par with Delta and United," said Horton of his company's proposed merger with US Airways.
Here's the landscape: American Airlines and US Airways are currently the fourth and fifth largest carriers in the country by passenger volume. Delta jumped to number one with its marriage to Northwest. Then United got hitched with Continental for the number two slot and Southwest Airlines swallowed AirTran to become the third largest.
So basically, we're just keeping up, says US Airways CEO Doug Parker.
"What we're trying to do here is provide more to our customers," said Parker at a hearing of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights. "We don't have the ability to connect people – or get people to as many places as some of our larger competitors. By combining we do."
But at what cost? questions Diana Moss with the American Antitrust Institute.
"The airlines want to compete in the global system and I understand that - that's where the business is going, that's where the dollars are," said Moss. "But we have to find a way not to sacrifice U.S. consumers on the altar of global competition."
Moss says these mega-airline mergers lead to less service and higher fares for small and mid-size cities and more flights being concentrated through large hubs. That bodes well for Charlotte, which is already 90 percent dominated by US Airways.
But Moss' analysis suggests Charlotte passengers could expect to see higher fares after the merger – particularly on flights to major hubs for American Airlines including Miami, Dallas-Fort Worth, Chicago and LaGuardia.
US Airways CEO Doug Parker will be in Charlotte this week touting the merger to employees and members of the Charlotte Chamber of Commerce.
But, a US Airways spokeswoman says Parker is not scheduled to meet with Charlotte's mayor or city council, who are currently at odds with Charlotte Aviation director Jerry Orr over airport management issues.