What Can Consumers Expect from the American-US Air Merger? Nothing Good

  • Share
  • Read Later
Jim Watson / AFP / Getty Images

American Airlines and US Airways have agreed to merge, and it looks like the result will be a mega-carrier that’s the world’s largest airline in terms of passenger traffic. Consumers groups say this is one marriage travelers should not be celebrating.

Before the merger announcement was official, the Consumer Travel Alliance, an advocacy group for travelers, published an op-ed stating that there would be “no compelling consumer benefits” if US Airways and American Airlines were combined. In fact, it would directly impact consumers in a bad way, via higher fares all around:

Competition will suffer. There will be just three major network airlines. All-in prices (airfares plus extra fees) will go up, and services will be reduced — all for a merger that is unnecessary for the long-term survival of either airline.

In a longer press release, the CTA’s Charlie Leocha wrote that previous consolidation in the industry squeezed certain gateways, resulting in fewer flights offered in many cities:

St. Louis is a ghost town compared to when it was a hub for TWA. Reno, Nevada, was abandoned by AA. Cincinnati has shut down several of its terminals because of cutbacks from Delta. Cleveland was forced to negotiate a separate agreement with Continental/United to keep its hub operating temporarily.

(MORE: When Airfare Is So Cheap It’s a Steal — Literally)

Airline service at Charlotte and Phoenix is likely to suffer with an American/US Airways merger, Leocha stated.

Business travelers also see little to no upside with the proposed merger. “From a consumer standpoint – individual traveler or corporate travel department – there are few benefits to offset the negative impacts of this proposed merger that include reduced competition, higher fares and fees and diminished service to small and mid-size communities,” reads a statement from the Business Travel Coalition. It goes on:

To be clear, there is benefit in a financially viable air transportation system. However, previous mergers have already enabled seat capacity cuts, higher fares and billions of dollars in fees for ancillary services resulting in a financially strengthening industry. As such, consumer harms from this merger are indeed exacerbated, as there are no substantial countervailing consumer benefits.

But won’t the merger at least help travelers reach more destinations, via a larger network of routes and gateways? A USA Today editorial in support of the merger pointed to “more cities to fly to” as one of the main upsides for consumers:

With the merger, [travelers would] find a lot more options for getting around. And despite the fact that the two carriers would make up the world’s largest by revenue, they currently overlap on just 13 routes.

The CTA’s Leocha blew a hole in that argument, however:

The claim that this merger will provide more destinations is hollow. Whatever new cities are added by a future AA/US network are subtracted from the current airline alliance network that US Airways enjoys with United. The net effect is that, overall, consumers are left with nothing new and no improvement to the status quo.

The overall takeaway for consumers, as a Businessweek story succinctly put it, is likely this:

Consolidation is a euphemism for fewer seats, and with fewer seats come higher prices.

(MORE: Ugh, More Airline Fees: Want a Decent Seat on Southwest? Pay Up)

A CNN Money post explained that in addition to higher fares, travel experts expect more headaches for travelers in a post-merger scene. Specifically, more lost bags, flight delays, and flight reservation glitches are predicted, at least for a few years as the airlines figure out how to combine their systems:

“You cannot find an airline merger in recent times that went well,” said Joe Brancatelli, editor of JoeSentMe, a business travel web site. “The bigger the merger, the more problems there are. Computer integration is very complicated. If you records go awry, your bags will probably go awry.”

5 comments
Fundango
Fundango

Yet again an example of the discredited theory that by putting two lousily run organizations together, miraculously an efficient, customer friendly one will emerge. Never has done, never will.

ladytech777
ladytech777

Deregulation ruined the entire industry. Why- so Charlie the Cop or Fireman Freddie could take their whole family to Disney for $100 on a $180million dollar airplane??Airline employees have been subsidizing the flying public for 25yrs. Now we have airline CEO's that want 100's of millions in bonuses for playing with the stock price! The free ride is over.

tomsquawk
tomsquawk

i think deregulation and lower prices are what got us here.

therantguy
therantguy

Dear public...here is a universal truth for you...mergers are ALWAYS about cutting costs and competition. Name me one merger in the history if the planet that resulted in lower prices or better service?

formerlyjames
formerlyjames

Even more ugly skys ahead. Nasty, ugly, uncomfortable, expensive crap.  Welcome.  And by by.