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. That’s according to a report released by the American Antitrust Institute (AAI) and Business Travel Coalition (BTC).
“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.
“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,” said report co-author Kevin Mitchell, Chairman of the BTC.
The White Paper says 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 Department of Justice investigation into the proposed merger would be informed by lessons from the effects of previous legacy mega-mergers (for example, 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 one world alliance to which it would likely belong.
“The Department of Justice might also focus on the potential adverse effect of the proposed merger on the carriers’ incentives to disclose ancillary service fee information,” Mitchell said.
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,” Moss added.
Moss and Mitchell said 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.