The proposed merger between American Airlines and US Airways may not be a done deal, even if almost everyone is behaving as if it were.
Although the combination, which would create the world’s largest airline, has pushed back from the gate, it’s still not cleared for takeoff. That may be a good thing for air travelers.
Folding the two companies into a single $11 billion airline may make sense on Wall Street, but some folks on Main Street still don’t see the point. Asked whether they’d approve the corporate marriage in a recent online survey by the Consumer Travel Alliance (CTA), a Washington nonprofit organization that advocates for travelers, more than two-thirds of the respondents (68 percent) said that they’d deny the companies permission to hook up.
“From a passenger’s perspective, there’s no reason to let American and US Airways merge,” says Charlie Leocha, CTA’s director. “None at all.”
Leocha says that the regulators he has spoken with are skeptical, too. A study that CTA commissioned in April suggested that the merger may eliminate more competition than previously thought. One of the key benefits of the deal, according to both US Airways and American Airlines, is their “complementary” route structure, with only 12 overlapping nonstop routes. But the CTA study shows that the number of competing connecting routes is 761. (Disclosure: I co-founded the CTA and serve as its volunteer ombudsman.)
A new Government Accountability Office study on the merger, still unreleased, is thought to support the conclusion that American and US Airways compete more than they initially claimed, and that has some airline insiders nervous. Both airlines still require Justice Department and European Union approval before they can start repainting their planes, and regulators may be reluctant to offer their blessing.
John McDonald, a spokesman for US Airways, said that the airlines’ own analysis is sound and supported by numerous other experts. “The merger is not predicated on capacity reductions,” he added. “The new American will compete against United, Delta, Southwest and a number of successful smaller but fast-growing lower-cost airlines, such as JetBlue, Spirit, Allegiant and Virgin America. That is a big plus to consumers.”
McDonald said the CTA results are “skewed” because they looked at connecting routes, which are “less preferable to consumers” and failed to consider competition from low-cost carriers and major airlines on all those connections. Also, the analysis assumes that a new American would raise fares as part of its strategy. “The merger benefits are not reliant on any fare hikes,” he says. “The marketplace remains brutally competitive.”
But passengers still need some persuading.
“I’m against the merger,” says Marian Levin, a retired teacher who lives near Philadelphia, where US Airways has long enjoyed a commanding market share. “Flying out of Philly is always much more expensive than other airports, especially if you want to fly nonstop. I think that merging the two airlines will only make it more expensive to fly.”