US Airways chief warns of fewer flights to smaller cities after American merger

By:  NBC News - Diane Bartz, Reuters
Source: Reuters

Forcing a combined American Airlines and US Airways Group to  surrender slots at Reagan National Airport would risk fewer flights to small and  medium-sized cities, US Airways CEO Doug Parker told lawmakers on Wednesday. 

Parker was testifying to a Senate subcommittee on the impact of the  proposed merger of the two airlines.

Servicing larger cities is more  profitable and thus the airlines, which together have two-thirds of the take-off  and landing slots at Reagan National, near Washington D.C., would cut service to  smaller cities if the Justice Department or Transportation Department required  divestitures as a condition of the deal, he said.

"This doesn't mean to  sound threatening. We want to fly to these communities," Parker told the Senate  Commerce Committee's subcommittee on Aviation Operations, Safety and Security. 

US Airways announced on February 14 that it planned to buy the  struggling carrier to create an $11 billion airline that would be the largest in  the United States. The companies hope to complete the deal by the end of  September.

Antitrust experts have said the Justice Department could  request divestitures of some slots at Reagan National and a small number of  other airports. Outside these hubs, the carriers fly different routes, for the  most part.

The nonpartisan U.S. Government Accountability Office said in  a report issued on Wednesday that the two airlines overlapped on 12 non-stop  domestic U.S. flights, and that there were no competitors on seven of them. 

At Reagan National, the new airline would have 68 percent of slots, far  above Delta Airlines with 12 percent, United Airlines with 9  percent and the 11 percent held by other airlines, the GAO said. 

Senators Maria Cantwell of Washington state, Democratic chair of the  subcommittee, and New Hampshire's Kelly Ayotte, the top Republican, worried  about the loss of service to smaller cities. Cantwell noted possible follow-on  economic losses for those cities and surrounding communities if flights are cut. 

West Virginia Senator Jay Rockefeller, chair of the full Commerce  Committee, also expressed concern.

"Other airline CEOs have repeatedly  promised that merging their airlines would lead to more choices for travelers in  small and rural communities. I have found that not to be the case, at least in  West Virginia," he said in a statement.

In late May, more than 100  members of Congress asked U.S. regulators to allow the new American to keep all  the slots at Reagan National. The airport is used by many members of Congress to  travel to and from their home districts.

The U.S. airline industry has  seen five years of rapid consolidation. Delta acquired Northwest Airlines in  2008, United merged with Continental in 2010 and Southwest Airlines  bought discount rival AirTran in 2011.

With fewer carriers  competing, ticket prices have risen. The average fare rose about 8 percent to  $375 in the third quarter of 2012, compared with $346 in 2008, according to the  U.S. Bureau of Transportation Statistics.

AMR filed for bankruptcy in  2011 and initially opposed a merger, but agreed to explore one under pressure  from creditors and unions.