Next month, the largest airline in the world will be American. Literally — the merger between the parent companies of American Airlines and US Airways to create “the new American” will consolidate two major international travel networks.
The merger represents the final phase in an industry consolidation. Delta and Northwest merged, then United and Continental. When American and US Airways arrived late to the consolidation gate, the government balked. That arguably wasn’t fair to the companies, which wanted a web of connections that can match those of the now-huge Delta and United, instead of having to surrender potential profits to those behemoths.
Yet, the government argued in August, US Airways has been a plucky competitor, disrupting the pricing schemes of the larger legacy carriers. Merged with American, it wouldn’t play the same role. The combined firm would also have a near-lock on the takeoff and landing slots at Reagan National Airport.
The key to the settlement was bringing JetBlue, Southwest, Spirit and other lower-cost carriers into the equation. Requiring the merged American to surrender to these airlines coveted slots at seven major airports will introduce a measure of competition on high-demand routes, offsetting the anti-competitive effects of having fewer big players in an already concentrated industry.
That could well be a better result than taking the matter to trial would have yielded.
The Washington Post (Nov. 14)