Over the upcoming Thanksgiving holiday, 25 million passengers will travel by plane, according to airline-industry estimates, with many taking flights on American Airlines or US Airways. Those two carriers are moving ahead on a merger that would create the nation’s biggest airline, and questions persist about how that deal will affect consumers.
After the U.S. Department of Justice filed a lawsuit in August to block the merger, citing concerns about competition, the airlines made concessions to address those issues. Then, on Nov. 12, the Justice Department announced an agreement to settle the suit. A federal court will ultimately decide whether to approve the deal.
Under the terms of the settlement, American Airlines and US Airways must divest themselves of prime take-off and landing slots at six key airports in Chicago, New York, Washington, D.C., and other cities. The carriers would be forced to sell those slots to low-cost carriers such as Southwest and JetBlue. Without this divestment, the “New American Airlines” would control 68 percent of the slots at Washington’s Reagan National Airport, for example.
Consumers Union, the policy and advocacy arm of Consumer Reports, believes this change could benefit the passengers who use these busy, congested airports. Historically, the entry of a low-cost carrier has resulted in lower fares, in what the U.S. Department of Transportation dubbed the “Southwest Effect.”
These concessions could provide a real shot in the arm to low-cost carriers and might lead to lower fares in those markets. But consumers in smaller markets could still be left underserved, with fewer choices for flights.
Once this merger happens, American, Delta, United, and Southwest will together control about 80 percent of the domestic market, an unprecedented concentration. We remain concerned that the marketplace is becoming dominated by larger airlines that are essentially too big to fail.
We hope that the federal court reviewing the merger won't sign off on the deal until it is satisfied that the settlement—with additional requirements, if called for—preserves the full benefits of competition.
This feature is part of a regular series by Consumers Union, the public-policy and advocacy division of Consumer Reports. The nonprofit organization advocates for product safety, financial reform, safer food, health reform, and other consumer issues in Washington, D.C., the states, and in the marketplace.
Consumer Reports has no relationship with any advertisers or sponsors on this website. Copyright © 2007-2013 Consumers Union of U.S.
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