Analysis: Merged American Airlines-US Airways would offer more, could charge more

Fri Aug 16, 2013 5:42pm EDT
 
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By Karen Jacobs

(Reuters) - For travelers, the question of whether to let American Airlines and US Airways merge into the world's largest carrier may boil down to this: pay more and get more, or pay less and get less.

A new mega-airline, with the American brand name, would have more flights on more routes and could charge higher ticket prices on at least some. This would appeal to business travelers who generally favor convenience and comfort over price.

If the airlines don't merge, they might offer lower prices, but could ultimately be forced to cut routes or go out of business as they try to compete with much larger United and Delta, themselves the products of mega-mergers over the last few years.

Business travelers, who spend two or three times as much as those flying for fun, are likely to lose out if the merger fails, since there would be no third alternative to the large domestic and international route networks offered by United and Delta.

"If you're a corporate traveler, you're basically going to be faced with two stalwart airlines, Delta and United, and you'll have actually less choice at the corporate level than you did if this merger would occur," said Andrew Davis, an investment analyst with T. Rowe Price, which owns airline shares.

The merger "certainly was not looked at from that perspective" by the government, Davis said.

The U.S. Justice Department sued on Tuesday to block the $11 billion merger on antitrust grounds, arguing that allowing the fourth large U.S. airline merger in five years could lead to higher ticket prices and fewer choices for consumers.

The merger "would likely substantially lessen competition and tend to create a monopoly," the government complaint said.   Continued...

 
US Airways passengers check in for their flights at Charlotte Douglas International Airport in Charlotte, North Carolina in this April 20, 2012, file photo. REUTERS/Chris Keane/Files