Merger will decrease airline competition

Congressional leaders have understandably shown concern about United Airlines’ proposed acquisition of U.S. Airways, combining the first and sixth largest airlines. Minnesota legislators particularly fear an eventual merger would inspire other airlines — specifically Northwest — to do likewise. Although the airline industry seems competitive compared with other industries, any further consolidation of the industry would significantly damage consumer choice, quality and pocketbooks. The Justice Department must hinder United’s proposal to ensure that Congressional deregulation in 1978 continues to support competition in the skies.
When United officials confirmed in May that they had been discussing the merger, competitors, legislators and business insiders understood the $11.6 billion merger’s implications. Now, at least three other major airlines have confirmed ongoing talks of mergers with smaller companies. Some airline analysts say consolidation is the only way the industry can grow. Others think airlines are simply hoping to frighten antitrust regulators in Washington, indicating that if one major airline merges, the remaining leaders will have to follow.
Canada Air acquired Canadian Airlines last year, giving the combined company control of 80 percent of Canada’s airways. Despite antitrust admonitions by many Canadian officials, the government allowed the merger to take place, leading to diminished customer service, anti-competitive practices and overbooked flights. U.S. fliers would likely witness similar consequences from airline consolidation.
The top three airlines — United Airlines, American Airlines and Delta — now control 56 percent of U.S. traffic. Potential mergers could bring their dominance to 85 percent of the market. Currently, the major airlines squash upstart airline competition through hub dominance and by using nefarious pricing tactics. The Justice Department filed a lawsuit against American Airlines in May 1999, alleging the company cut fares whenever a small airline attempted to compete, only to raise the fares when the new entrants left.
Small airlines already encounter incredible barriers when trying to enter the industry. Further consolidation would make low-cost alternatives to the big airlines all but extinct. Sun Country Airlines has accused Northwest — which controls nearly 80 percent of Twin Cities air travel — of predatory pricing and monopolistic conduct. Formerly a charter carrier, Sun Country began competing directly with Northwest for routine flights last April and has faced difficulties obtaining gates at some airports.
United officials have said if they merge with U.S. Airways, the combined airline would sell 222 slots at Washington’s Reagan National Airport to a new airline to be created by one of U.S. Airways’ board members. Empty acts like this one are indicative of the airline industry’s inability to regulate itself. United did not say they would offer any of the gates to small airlines like Sun Country, an act that might have demonstrated the airline was actually concerned about increased competition, lower prices and better service.