GAO: American-US Airways merger will reduce competition

By:  USA Today - Bart Jansen
Source: USA Today

WASHINGTON -- The proposed merger between American Airlines and US Airways will reduce competition for 1,665 flight choices affecting 53 million passengers, a congressional watchdog told a Senate hearing Wednesday.

The analysis by the Government Accountability Office of connecting flights in 2012 suggested that the results of the merger would spread far wider than the 12 overlapping nonstop destinations, which the airlines cite as they seek government approval of the merger.

But the GAO analysis said all but 24 routes would still have competition from at least two airlines, just not as much. And Gerald Dillingham, GAO's director of infrastructure issues, he said the merger would create a new competitor for 210 flight choices affecting 17.5 million passengers.

"While the airlines have not announced specific plans for changes in their network or operations that might occur should the merger eventually be allowed to proceed, the combined airline could be expected to change its network structure over time, including where it maintains hubs," Dillingham told the Senate transportation subcommittee on aviation.

The airlines hope to finalize  the merger later this year, but  the Justice Department, American's bankruptcy judge and company shareholders must still sign off.

Lawmakers repeatedly voiced concerns on how service might be reduced after a merger.

"If this merger is to be approved, it will lead to even more consolidation of the domestic airline industry," said Sen. Maria Cantwell, D-Wash., the panel's chairman. "Will this merger mean higher ticket prices, more fees, and fewer options for flights?"

Doug Parker, CEO of US Airways who will become CEO of the combined airline that will be called American, said travelers would benefit from a stronger, merged airline that can compete against three larger airlines that resulted from mergers in the last decade.

"Consumers will benefit from the enhanced competition," Parker said.

But Charlie Leocha, director of the Consumer Travel Alliance, an advocacy group for passengers, urged a stop to "merger madness."

"Competition will be clobbered," Leocha said. "Air fares will go up."

Lawmakers asked repeatedly about the merged airline controlling two-thirds of the slots for takeoffs and landings at Washington's Reagan National Airport and one-third of the slots at New York's LaGuardia Airport.

Parker refused to guarantee that the same communities  would be served after the merger. But focusing on Reagan, Parker said US Airways serves small and medium communities and would like to continue.

If the Justice Department forces the new American to surrender slots at Reagan, Parker predicted competitors would stop serving those communities. When US Airways lost slots at Reagan a year and a half ago, JetBlue acquired 16 slots and  used them to serve Boston, Fort Lauderdale, Orlando and Tampa.

"We were forced to reduce service to smaller communities," said Parker, citing an end of service to Madison, Wis., and Grand Rapids, Mich. "We want to fly to those communities."

American and US Airways have argued they must merge to match competition from the mergers of Delta and Northwestern, United and Continental, and Southwest and Air Tran.

But the prospect of fewer choices worried some lawmakers, such as when several airlines recently raised fees for changing flights from $150 to $200.

"If we go down to four (major airlines), we will see more lockstep behavior," said Sen. Amy Klobuchar, D-Minn.

Parker said the fees were raised to discourage travelers from changing their plans, which is expensive for airlines to cope with as they try to keep planes full.

"The fee is meant to discourage changes," Parker said.