Thursday, February 14, 2013

American Airlines approves merger with US Airways

by Ashley Halsey III, - February 13
Bankrupt American Airlines and its dogged suitor, US Airways, will announce a merger Thursday that would create the world’s largest air carrier and put 86 percent of domestic air travel in the hands of four big airlines. 

The merger was approved by the boards of both airlines, ending months of negotiation that began with American giving a frosty response to the initial overture from US Airways.

Described as the last airline mega-merger in a decade of consolidation, the marriage would see the US Airways brand consigned to the dustbin of aviation history, joining Pan Am, TWA, Eastern Air Lines, Northwest and Continental. The agreement was first reported by other news organizations; a person familiar with the negotiations confirmed the deal to The Washington Post.

The marriage would rescue American from bankruptcy and put the much smaller US Airways into a partnership with the muscle to compete against Delta Air Lines and United Airlines, both of which have grown through recent mergers. Together with Southwest Airlines, the big low-cost carrier, the foursome would dominate passenger travel in the United States.

The merger may lead to new competition at the one major airport where US Airways and American have significant overlap: Reagan National Airport. Combined, they control almost 68 percent of the flights at National, a situation that could concern regulators.

As for the affect on consumers, “I don’t think it’s going to impact airfares significantly,” said William S. Swelbar, a researcher at the MIT International Center for Air Transportation. “I think that we’re seeing a dynamic already where the airlines are passing on the increased cost of fuel and labor to the consumer. I’m not prepared to see egregious gouging by the airline industry just because of this merger.”

Analysts see the two airlines as a good match, combining US Airways’ strength in the eastern part of the country and American’s greater influence in the West and global destinations. But Swelbar said federal regulators may object to their domination at National.

“American and US Airways control the lion’s share of slots at National,” Swelbar said. “I expect that the regulators will force a combined American-US Airways to divest themselves of some of the slots, and competitors would be free to compete for those available slots.” He said Southwest and JetBlue are likely to show particular interest in grabbing more passenger share at National.
Airline consolidation may sound ominous to consumers who have benefited from competitive airfares, but some analysts say the trend that had Delta swallow Northwest Airlines, United merge with Continental, Southwest absorb Air Tran and, now, American agree to partner with US Airways has stabilized a troubled industry.

“I think people are going to frame this as fares going up and that’s bad for the public,” said Joshua Schank, president of the nonprofit Eno Center for Transportation. “But it has economic benefits for a country to be able to have a stable airline industry. That may outweigh the slight increase in fares, and, historically, fares are still low, and more people are flying.”

More: THE WASHINGTON POST:  american-airlines-approves-merger-with-us-air