They’re calling it the last big earthquake in the realignment of the U.S. airline industry, the final mega-merger that will stabilize the landscape for years to come. But if the deal involving American Airlines and US Airways is ratified, the average flier won’t notice much immediate change.
Fares may go up a tick or two, but with four big airlines still standing, none will have such a lock on the market that it can jack up the cost of a ticket. Frequent fliers who hold onto their miles will be able to use them on the new carrier (or in the interim, on either carrier).
Federal regulators may demand that the new airline give up some of its business at Washington Reagan National Airport, where its combined share amounts to almost 68 percent of the flights.
If Jet Blue or Southwest moves in to take those slots, their low prices may provide a brief bonanza for National passengers, but airfares are so tied to the fluctuation of jet-fuel prices that there are no long-term guarantees.
The deal still needs approval of the judge handling American’s current bankruptcy proceedings and must pass muster with the antitrust division at the Justice Department.
“At the end of the day, they’ll permit it to go forward,” said Bruce Schneider, an antitrust lawyer with the Stroock & Stroock & Lavan law firm in New York.
Though US Airways forced the deal with the larger airline, and although its management will dominate the new carrier, the planes will fly under the American banner. The name US Airways will disappear, but it’s only been around since 1996, with the airline calling itself USAir and Allegheny Airlines before that.
A report last year by PricewaterhouseCoopers concluded that the “mega-mergers over the last seven years have not caused U.S. domestic passengers to experience dramatically higher airfares or drastically reduced competition on most routes.”
The new American Airlines will be a bit player at Dulles International Airport, where it had less than 8 percent of the passenger traffic last month. United is the dominant carrier there.
The number is slightly higher — almost 10 percent — at Baltimore-Washington International Marshall Airport. Southwest Airlines holds sway at BWI.
Though American is struggling through bankruptcy, US Airways has survived bankruptcy twice and faced an uncertain future without the alliance. After United merged with Continental, Delta joined Northwest, and Southwest absorbed Air Tran, the chance that either US Airways or American could battle alone against the three huge airlines was judged as slim.
If the merger is finalized, by later this year the four major carriers will control 86 percent of domestic flights, analysts said.
“I have been a long proponent of consolidation in the industry,” Doug Parker, chief executive of US Airways, said in a conference call. “And this is the last major piece needed to rationalize the industry and make it profitable. This is an extremely complementary merger.”
US Airways has its strength in the eastern part of the country, while American is stronger in the West and in the international market. Parker said that US Airways reaches 62 cities that American does not, and that American serves 130 cities that US Airways does not. He said they have just 12 overlapping routes.
The PricewaterhouseCoopers report also said there was no proof that the big mergers had resulted in a decline in airline service or otherwise negatively affected passengers.
But the merger came under immediate scrutiny on Capitol Hill.
Sen. John D. Rockefeller IV (D-W.Va.), who chairs the committee on commerce, science and transportation, said the price of the mergers that have stabilized the airline industry may be paid by passengers in smaller cities.
“It has also resulted in fewer choices for consumers, higher airfares and reduced air service to small and medium-sized communities,” Rockefeller said. “Any further airline merger must be carefully evaluated to make sure it is in the best interest of the traveling public by creating more competition, more options and lower fares.”
On the House side, Rep. Rick Larsen (D-Wash.), ranking member of the aviation subcommittee, said he was relying on the antitrust regulators to consider the implications for passengers.
“Shareholder value may be in the interests of the airlines as companies, but choice and quality are in the interests of the consumer,” Larsen said.