American/US Airways Merger-Bashing Relies on Inaccurate Assumptions and Bad Information

Over the last couple weeks, there has been a lot of talk about how the American-US Airways merger is a bad idea. Much of this is just political posturing as the feds review the case, but some in the media are putting out their negative feelings by using strange assumptions and twisting data. I had ignored a lot of this until now, but seeing Chris Elliott’s terrible piece in USA Today flipped a switch in me. I read that and immediately started writing my response.

Why don’t we just go through it bit by bit, shall we? Here’s the general premise of the article:

2013_07_09 usaamergerhysteria

Or in his terms…

Passengers will probably pay more and get less. Cities are likely to lose airline service. Many airline employees might end up with pink slips.

I’ve taken the following quotes out of order to match the original order of the assertions above. I don’t believe it changes the context, but you can always read the article yourself to judge.

Passengers will probably pay more and get less.

A merger “would substantially eliminate competition on important routes, creating a dominant firm that — acting unilaterally post-merger — could raise fares, degrade service and eliminate consumer choice,” the [American Antitrust Institute’s] Diana Moss recently said in a congressional hearing.

Let’s start with the “pay more” piece and then get to “get less” shortly. This particular statement by the AAI, used to support Elliott’s point actually refers to the handful of hub-to-hub routes and not to the merger in general, but of course, Elliott fails to note that. I also don’t know much about this group except that they partnered with the Business Travel Coalition (BTC) to do the study. The BTC is generally anti-airline, and is funded by groups that drive that agenda. That doesn’t say anything about this specific report, but it does raise a red flag.

Does that mean fares won’t go up at all? I wouldn’t say that. On average, it wouldn’t surprise me if fares went up somewhat depending on a variety of factors including demand, capacity, competition, etc. But that could happen even without this merger. It’s very hard to isolate fare changes and then say they are specifically due to the merger and not any external factors. But there is a big “check” in place here anyway. If the airlines let fares go up too much, then competitors will come in and thrive. That’s how it always works in this industry.

Better service? According to several customer service benchmarks, it doesn’t get much worse than this. The 2013 authoritative American Customer Service Index (ACSI) slapped American Airlines and US Airways with scores of 65 and 64 out of 100, respectively. Last year, US Airways was the second most complained-about airline, and American was number three, according to the Transportation Department.

On the “better service” side, the assumption here is that mergers automatically make things worse. That’s just a bad premise to start with. Look at the Delta/Northwest merger. So far in 2013, ACSI gives Delta a 68. The last time Northwest achieved that on its own was in 1995. So it has almost never been better than it is now. Delta last got a 68 or higher in 1999. That means two airlines came together and got better. Go figure.

United may be a different story right now in its merger, and scores will always take a dip during the process. But you can’t just flat out say that mergers make things worse in the end. In this case, you have a lot of angry employees at American who, under proper leadership, might start delivering a better experience. And as for US Airways, the scores it gets are actually the highest its seen since the late 1990s. Trends are more important than absolute numbers. With US Airways management taking over, I would be more hopeful about improvement than I would if the airlines stood alone.

The same goes for DOT numbers. The trends at American for complaints do not look good but the opposite is true for US Airways. With the US Airways team taking over, you would imagine that things would improve across the board, once the merger kinks are worked out. That should be a good thing.

Cities are likely to lose airline service

More service? A U.S. Government Accountability Office report warns that 1,665 airport-pair markets will lose one effective competitor in a merger, affecting more than 53 million passengers.

It’s time for fun with numbers! This is actually the piece that really got me going. I’ve already been digging into the GAO report, but I don’t quite have everything I need yet. But the above statement is using facts to make a point that isn’t valid.

The GAO defines an “effective competitor” as one having more than 5% of the market. When you merge big airlines, of course you lose an effective competitor in many markets. That’s how mergers work. But guess what? Of those 1,665 markets, more than 70 percent still have 3 competitive airlines in the market after the merger. Oh, and Elliott fails to mention that 210 markets actually see an increase of an effective competitor. (I assume those are things like Burbank to Corpus Christi which neither American nor US Airways can connect today.)

Are there some markets that will see real impacts? Yes, according to the study, 24 markets will go from 2 to 1 airline, but even that’s misleading. The GAO report specifically excludes nearby airports even though that’s usually included in analyses. So that service from DFW to Mesa on Spirit doesn’t count, apparently. Oh, and let’s not forget that Southwest gets the right to fly anywhere in the US from Love Field next year. There will be more competition when that opens up.

I could go on and on about the GAO report, but I’ll save that until I have more info. In short, it’s not proving what some people seem to think it’s proving.

Also, I wonder if Parker has been to the St. Louis airport recently, which lost almost half its passenger traffic after American acquired TWA in 2002, or to Cincinnati, where air traffic plunged after the Delta-Northwest merger? These former hubs are now ghost towns, despite promises made in a prenuptial delirium.

This is a poor comparison that shows Elliott’s lack of understanding about how airlines choose hubs. Some of the problem lies with the airlines themselves – they like to claim that they will keep all hubs when in reality that may not be the case. With American, I think the airline actually believed it would keep TWA’s St Louis hub even though it was a bad idea from the start. There just wasn’t enough local demand and St Louis didn’t provide any real additional connectivity that wasn’t already provided by Chicago and Dallas. It was doomed.

You don’t have that situation in the American/US Airways merger. Are Philly and New York close? Yes, but New York can never be a hub for American because it doesn’t have enough slots (and it has a ton of competition). Philly is a big market that works as a hub. If anything loses service, it’s likely to be New York which won’t miss it. Same goes for LA and Phoenix with LA playing the part of New York. And Miami is a terrible option for a domestic hub while Charlotte is a great one. I don’t see any hub in a situation like that of St Louis (or Memphis, or Cincinnati, or Pittsburgh….)

Which cities are going to lose service? If any, it should be the ones that already have a ton of it anyway like New York and LA. That shouldn’t be much of a concern to antitrust authorities.

Many airline employees might end up with pink slips.
Elliott didn’t bring this up again in the entire article, so apparently he just thought it would be a fun little dig to add at the beginning. Were these two overly-bloated airlines coming together, then yes, pink slips might be around. But US Airways is already pretty lean, and American was slashed during bankruptcy. There will be some overlap, especially in management functions, but chances are that you can get most people to quit by offering buy-outs. I wouldn’t expect any mass layoffs directly because of the merger, especially not on the front line.

In general, it seems like pundits are trotting out the usual, tired arguments about why mergers are terrible. Most of the arguments simply don’t hold water.

[Original naked protestor image via Shutterstock]

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106 Comments on "American/US Airways Merger-Bashing Relies on Inaccurate Assumptions and Bad Information"

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BMK
Guest

I heart you Brett … Chris Elliott is really starting to piss me off lately, it seems he only writes recently for pageviews and clicks, not facts, then gets pissy when you question him. You on the other hand report facts and are a reason why this site is one of the first I go to when I wake up.

Ben G
Guest

I very much agree with you here, except on the “lately” part. I have always found Chris Elliott to be very nitpicky and off-base. I appreciate the goals of what he does but I think that his methods are often suspect and his results are often due to his position, not because he is right. I stopped reading pretty much anything from him years ago.

MilesAbound
Guest
BMK is right on, CE just writes for clicks in between his sponsored trips. And you do a great job Brett of tearing up his whiny arguments. However what is not answered by CE in particular and even here is who should pay for keeping the airlines separate? Does CE think this is something maybe the government should subsidize? Because the market has proven that it simply cannot support the number of carriers that were in existence historically. The airline industry hit a downturn and the number of airlines in existence got culled. That is how it works in any… Read more »
David
Guest
CF – I think you’re taking a slightly unfair line on this. Yes, consolidation needed to happen – 10 years ago the US had too many major airlines with labour and consumers having to much power while shareholders were being screwed. However, the reason for consolidation is typically that consumers are purchasing the product at below the cost of production leading to companies losing money, and the major players need to 1) reduce their unit costs and 2) gain more market power. A US based airline may have the legal right to jump into new domestic markets whenever they like,… Read more »
ChuckMO
Guest
I’m surprised nobody is analyzing this from a Global Alliance perspective. We currently have 3 GAs: Star: UA/US – oneworld: AA and SkyTeam: DL. Although UA/US currently codeshare, they do not have a domestic Joint Venture. A combined AA/US would bring a market share balance to the GA’s in the U.S. Much of the debate is also centered on DCA slots, but with US currently in Star, the greater Washington/Baltimore area is under the thumb of that alliance. Southwest dominating BWI does not offer that airport an alliance option but an AA/US combo effectively breaks the Star hammerlock in the… Read more »
Ben
Guest
The new American will still be the dominant carrier at DCA, but I highly doubt the feds will let AA/US walk away with 70% market share. Yes, there are other airport options in the DC area, but as I mentioned in previous posts, DCA is the centralized airport for the region. With traffic around DC being some of the worst in the nation, BWI is a huge hassle for people living in Northern Virginia and people in the Maryland suburbs generally avoid Dulles. DCA is also the only slot restricted airport among the 3. Whether it is right or wrong,… Read more »
Bravenav
Guest

One of the more blatant lies in the USAT piece is “…St. Louis airport recently, which lost almost half its passenger traffic after American acquired TWA in 2002.” St. Louis may have lost its flow traffic, but its originating passenger traffic is higher today than in the referenced year 2002 (when most passenger declines were due to 911).

ChuckMO
Guest
As a resident of STL for 30 years I’ve seen the highs and lows. While losing the TW/AA hub was a blow to local pride, in real terms airfares have gotten better. Anyone who lives in a hub city knows airfares can be ridiculously high in some markets…with a more even market share balance the fares are much more reasonable. Having WN as your largest carrier doesn’t hurt the equation of course, but they’ve been in the STL market for nearly 30 years and I’ve seen the difference the loss of hub status has on the leveling of fares. Sure,… Read more »
T. Coronado
Guest
Further to the STL discussion: It may have gone unnoticed by many (but not by me) that Delta has slowly been filling the gap at STL for a couple of years. Yes, I still have to connect to get to most places, but they generally are civilized connections, and STL will not likely see nonstops to Paris by anyone again in my lifetime. We have DL nonstops to JFK (and LGA) and loads of connections through ATL and MSP, a few more through SLC and DTW. I can tell you that the A Concourse is not a ghost town. I… Read more »
A
Guest
It was inevitable that we would consolidate down to a “big 3” oligopoly in the legacy airlines. Just feels like the writing has been on the wall ever since Delta/NW started the latest rounds of mergers. Still people are going to be nostalgic. My father always talks about how “great” it was to fly Braniff or Western, etc. I remember flying TWA and Eastern as a kid and it was nice as the planes were never full and we got fed a meal (that everyone complained about at the time). I think some sense of nostalgia drives reporting like this.… Read more »
Bravenav
Guest

Nostalgic feelings also gloss over the negatives of flying “back then” The frequent mechanical problems, the puddle-jumping across the country, the sky-high prices, the tiny airplanes to small towns (remember the Metroliners and Bandeirantes?) and worse the crashes and hijackings that happened much more frequently.

David SF eastbay
Member
There will always be people who fuel the fire for no other reason then to keep themselves in the news. This way other people quote them, interview them, etc. What they say, is to only benefit them and nothing/no one else. As people get older they will always look back and say how things were nicer or better in the past using ‘nostalgia’ as -A- above said to guide their thoughts, and in some cases because it was better in the past. It is interesting how some people will put out data about this merger, but it’s not like it’s… Read more »
Ron
Guest
Cranky, perhaps the hub-to-hub routes are just a handful, but they’re important and they could suffer a lot. Shortly after the United–Continental merger I was helping a relative get from New Jersey to L.A., and Newark–LAX fares were at around $600 one-way consistently, compared to under $300 before the merger (now, with American and Virgin also serving the route, prices are back below $300). Competition at alternative airports across the Hudson did nothing to mitigate the fares — United saw an opportunity to gouge customers who needed to fly EWR–LAX non-stop, so they did. Competition did come in eventually, but… Read more »
Nick Barnard
Member

Ron, non-stop flights are the one spot where an airline has pricing power – since they’re offering a product no one else offers, they can (and do!) charge more.

Ron
Guest

Precisely. Which is why reducing competition on such routes should not be taken lightly. Airlines should make a profit, but there should be checks on the profits they make where an airline is an effective monopoly (just like any other monopoly). And one of the best checks is preventing a monopoly from forming in the first place.

MJS
Guest

Competition is the best check in preventing a formation of a monopoly. In your own example, UA as charging (and more importantly, getting) a large fare for the route. VX saw opportunity, stepped in and fares lowered.

MeanMeosh
Guest
You have to remember, a prominent goal of Chris Elliott (and his friend Charlie Leocha) is the re-regulation of airlines, whether or not he has the guts to admit it. He wants Economy Plus seating, one checked bag, hot meals, and seat assignments together for his family at the front of the plane for “free”, i.e. the rich man behind the tree has a moral obligation to subsidize his travel. I guarantee he’ll be at the front of the line decrying the “windfall profits” of the airlines when the government orders these things, and coach airfares go up $80 each… Read more »
Nick Barnard
Member

$80? Ticket prices would probably double if there was reregulation..

MeanMeosh
Guest

Well, $80 would be about double the one way fare on that DFW-IAH short hop :)

But that proves the point I was trying to make. These guys will squeal if fares rise $80. Heck, they’ll demand Congressional action if they go up $50.

sundevils
Member
I was commuting weekly from San Diego to the midwest when American took over TWA. I know what I saw: 1) significantly reduced choices in every market where the two overlapped; 2) significantly increased fares after routes were eliminated; 3) layoffs of personnel. I saw the same thing when Southwest took over Morris Air. And again (in a huge way) when American took over Reno Air. As someone whose entire family lives in Tempe (home of US Air) I know much about the issues that STILL exist between the merger of America West and US Air, and how that has… Read more »
Consumer Mike
Guest

David, I observed much of what you did and fully agree with you. I also agree with you that the USA TODAY article is a realistic observation and fair prediction of what will happen [again] when this projected mega airline is created. Very challenging times, indeed, for the flying public. God help us!

Pigi kosmetika
Guest

Great article!

Ken
Member

If you look at the complaints on each AA and USAir’s facebook page, I would have to say AA is doing a much better job with customer service. Just saying….

Baron
Guest

Why are you so pro-the USAir and AA merger, Brett? The majority of the public doesn’t want it; I certainly don’t want it. I understand you were an airline employee or perhaps a lobbyist for US Air (that’s what it feels like). For us travelers, the merger is a horrible idea for so many reasons, not the least of which Doug Parker is predatory and has shown little concern for the people he transports which greatly frightens us all.

Jason H
Guest

What are the many reasons that the merger is a horrible idea?
And where do you get your numbers that the majority of the public doesn’t want it?

Joe L
Guest
This 250,000 mile per year business traveler wants the merger. Right now, there are only two US airlines that can really get you everywhere you want to go while having mileage programs you can use internationally. With an AA/US merger, there will be three such airlines. US is strong up and down the east coast, but somewhat weak for transcon and the Midwest. AA is strong transcon and in the Midwest, but weak on the east coast. Even if your totally unsubstantiated claim that most Americans don’t want this merger, those folks don’t really fly all that much in the… Read more »
DesertGhost
Guest
The GAO report isn’t too different from Chris Elliott’s piece. Both are filled with conclusions which have little basis in fact. Both regurgitate “history” and make the assumption that the U.S. airline industry is the same now as it was ten years ago. Things are different. The entire U.S. legacy airline industry (including Southwest) is now focused on profitability and providing a real return to investors. The US Airways / America West merger was the beginning of this sea change. That merger began the process of capacity discipline. One difference with this merger is that both US Airways and American… Read more »
Nick Barnard
Member

DesertGhost – Excellent. AW also failed at hubbing Columbus.

(For some reason I initially read PIT as PHL and thought you mistyped..)

DesertGhost
Guest

Nick Barnard – Mistyping is a disease I often have.

DesertGhost
Guest
To those who worry about less competition, I feel there’s more than one way to approach the question. To illustrate my point, let me state my premise as a question: Which is better, a large number of weak competitors, or fewer, stronger ones? Each of us has a simple remedy for what we perceive as high air fares. Don’t fly. That’s the hammer each of us wields. There’s a school of thought that says too much competition destroys all competition. All of the airline bankruptcies throughout history, whether the industry was regulated or not, are a simple testament to the… Read more »
Gary
Guest
One of the best explanations on how this merger will be better for competition was Cranky’s “best slide ever” which showed all the new city combinations by integrating US’s east coast with AA’s midwest. new options/opportunities. Re STL: AA loved the TW hub. It ran like a top. Unfortunately, it didn’t make money because the market was the inverse of what a successful hub needs: majority $$-making O/D, supplemented by logical lower priced connections. TW STL had the added factor of WN’s competition which kept even the O/D fares down. When 9/11 happened, whatever hope STL had of remaining a… Read more »
SAL
Guest
Re: DCA – I could see AA/US divesting around 15 slots with reductions coming from duplicate routes (ie Raleigh and Nashville) and consolidating high-frequency RJ routes into fewer flights on larger aircraft. Re: hubs – I think DFW, ORD, PHX, CLT, and DCA will be mostly domestic hubs with a few international routes. MIA and PHL will be international gateways with MIA serving Caribbean and Central/South America and PHL serving Europe and Middle East. The airline will likely remain a niche player in Asia as they don’t have a suitable hub for Asia flights, though PHX could become one if… Read more »
Consumer Mike
Guest
I really did not want to spend anymore of my time on what I believe to be the inevitable combining of US AIR and AMERICAN. However, the blog that Cranky has just unleashed forces me to add my opinion on an issue that is AND WILL NOT BE a good thing for consumers. It appears to me that Cranky is in self-denial on the effects and reprocussions of the proposed union of the two airlines. I, personally, believe that his opinions on the future of a potential mega airline are misleading and overly optimistic. The flying public has nothing to… Read more »
Nick Barnard
Member
Mike, you presume that Parker’s team will do to a US/AA what his team did to AW and AW/US. He’d be stupid to do so. If you accept that the DL merger was good for consumers (better product, more connections, larger airplanes (thats not here yet, but on the way.)) the US/AA merger should be as well. Parker’s team has been managing the airline they have, not the airline they wish they had. US/AA will give them an airline much closer to DL, and they know it needs to be managed in a different way. What is the investment saying:… Read more »
DesertGhost
Guest
Everything I’ve seen from Parker shows me he’s improved US Airways (along with a lot of committed people). I don’t know what DOT statistics you’ve read, but in the objective measures like on-time performance, baggage handling, etc. US has improved. Complaints are subjective and can be about a wide range of issues, many of which are trivial at best. I discount them as a measure of performance. Interestingly, many of the complaints I’ve read center around the discontinuation of in-flight entertainment, baggage fees, etc. I doubt those who survived the San Francisco crash are worried about the in-flight entertainment they… Read more »
Consumer Mike
Guest
D. Ghost, I belive and agree Parker may have improved US AIR to some extent, it could only go up from years past. The statistics I was referencing are on Crankys Blog. However, you splitting hairs on the contents of these reports in order for you to change the meaning is unfair to readers and misleading. It is your previlage to discount or interpret the reports any way you prefer, but unfair to change the content of this discussion by insinuation a trade off of safety for in flight entertainment (where did thjat come from?), fees or adequate competition. Competition… Read more »
DesertGhost
Guest

Consumer Mike – There’s nothing unfair about my comments. What does fairness have to do with this? I was very up front about the fact that I discount complaints and mentioned why I do so. It’s simply my opinion. You’re free to disagree.

SAL
Guest

What Parker’s team did with AW and AW/US has lead to profits, which an airline needs to stay in business. Why would Parker’s team deviate from a strategy that has proven to be profitable?

Furthermore, in airline mergers the CEO’s team ran the combined airline more or less the same way they ran the CEO’s premerger airline. I see AA/US following that trend.

Nick Barnard
Member

Well Parker managed the airline they had, which had limited ability to generate revenue (given the network it had) and managed it as such to be profitable at a lower revenue. So all of those fancy things like great seats and IFE went.

US/AA has much more ability to generate revenue, but it’ll have to invest more to get that revenue.

kozmaterry
Member

Cranky,

You are just a shrill for this merger. It is not needed each airline can survive on their own and fares will go up and service will go down.

PHD Transport Economics

Jason H
Guest

“…each airline can survive on their own and fares will go up and service will go down.”
If you are talking about free market economics, then airlines should be free to merge as dictated by the market conditions. Strictly speaking, of course it isn’t NEEDED, but if both airlines want to, then why shouldn’t they merge from an economic standpoint?

noahkimmel
Member

“Can survive” is a relative term. I am a NY based weekly business flier. Many of my peers have chosen to leave AA and US for UA and DL because of the larger networks and greater frequency offered. When US or AA reaches the tipping point of losing too much corporate travel, they will go into BK and have worse consequences for owners, employees, and consumers. They are not a low-cost airline with a low-cost network and cannot compete without the business community.

John G
Guest
For those who do not know, Cranky worked for America West, who wound up merging with and basically taking over US Air. He has a personal bias toward them, and that is somewhat natural. The idea that this merger is good is silly. It’s more consolidation, more pricing control by the four big airlines (that includes Southwest now). It’s already really expensive to fly on WN without a 2-week advance fare, and it’s getting worse. These airlines will continue to reduce competition and increase fares, and again they will play games with Saturday night stays and 3-week advance fares to… Read more »
Jim M
Guest

I’m not sure the airline industry will ever print money. . . .

As a newly relocated CLT-hub user I guess I prefer the status quo, but that never got anyone anywhere. I do mostly domestic but did a FRA-CLT run and that was great last month. Something neat about flying into a medium sized ctiy on an international run, and driving home. . .

noahkimmel
Member

your price is high, but tell me which airline is making huge profits? Global profit margin is expected to be 3.4% this year. I hardly call this gauging

jaybru
Member
I like and respect your analysis but I would note with reference to what you call a GAO report. As of this date, there is no GAO report, merely testimony by a representative of GAO to a House subcommitte chairman, ranking member, and subcommittee members. As you can appreciate, it is difficult for anyone, even what I consider the highly respected, non-parison GAO, to have come up with “The Word” on this matter in such a short time–from Feb. 2013 to June 19, 2013. A GAO report typically shows that it was aired, offered for comment, to all interested parties,… Read more »
DesertGhost
Guest

JayB- That’s funny. I read the GAO report. I believe I found it on a link from a Fort Worth Star-Telegram story. The report was the written part of the GAO’s testimony.

jaybru
Member
I don’t wish to overdo this, but I will, anyway. The official site for GAO products–reports, testimonies, etc.–is http://www.GAO.gov., and you can print a copy of any such document from there, no charge. If you don’t want to print, or can’t print a “hard copy’, they will do it for you, but for a charge. As you noted, newspaper web sites with interest to the subject, will redirect you to the GAO web site and the specific report. Almost anytime a GAO rep gives testimony to a congressional committee or subcommittee, the rep delivers a printed statement. The statement, or… Read more »
DesertGhost
Guest

Thanks for the insight.

Scott Dixon
Guest
Regarding the comment about AA’s decision to drop TWA’s STL hub (copy of comments below): I was living in St. Louis at the time, and there was tons of media coverage about it. American’s plans for STL can be found with a Google search. At the time AA was buying TWA (late 2000-early 2001), AA’s Chicago ORD hub suffered from delays due to congestion, and their DFW hub had similar problems to a lesser extent. The plan was to use STL as a reliever connecting hub. Then 9/11 happened just months after they bought TWA, and it took years for… Read more »
Consumer Mike
Guest

Scott, even today I miss the STL hub/connection. It was one of the things I liked most about the TWA/AA experience. Central location for domestic flights. Definitely less congestion than ORD or JFK. Better shops/stores and resturants than Atlanta. I always tried to connect through STL. That hub should NEVER be sold short. To bad it is under utilized in todays air plans.

mandel.jerry1
Member

Elliott omitted Parker’s testimony to Congress that many smaller cities will lose DCA travel if the New American has to give up slots that are now served by US.

Anonymous
Member
Brett, Why are you surprised…..? There are so very few reporters getting it right when it comes to aviation that this is really no surprise. They repeatedly (or intentionally) forget what they have been told before about the length of time it takes for an investigation to run it’s course, and have no appreciation for what’s involved. Those “details” don’t sell – so why bother include them? They are more interested in “sound bites” from (sadly) affected passengers, who have just one view-point. It is a sad reflection on the state of our media (non-)reporting.
Paul Rasmussen
Guest
Please! Pick and parse the USA Today article all you want. But the truth for me, here in Pittsburgh is: there will be changes and they are not likely to benefit the USAirways employees I know. The flight ops center here will most likely be merged into the AA operation at DFW. Will the PIT maintenance base meet a similar fate? Unknown, but I say it’s likely. USAirways decimated its hub here. Argue all you want about the reasons, but people in places like CVG and MEM will tell you the same thing. Mergers have resulted in less service and… Read more »
davidthomson_98
Member

I agree totally Paul. Otherwise, what purpose does the merger serve? Doubling up on facilities?

noahkimmel
Member

So without deregulation, when airlines were guarunteed a profit, please explain how a 50+% increase in fuel would result in a <10% increase in fares?

DesertGhost
Guest

What I find interesting is the number of airlines that went bankrupt or were allowed to merge to avoid bankruptcy when they were “guaranteed” a profit.

Jim
Guest

“But there is a big ?check? in place here anyway. If the airlines let fares go up too much, then competitors will come in and thrive. That?s how it always works in this industry.”

Hahahaha. I don’t know if you’re being sarcastic here, or if you actually said that with a straight face.

After WN ended service on PIT-PHL, US immediately more than doubled the fares. Where are the competitors who are coming in and thriving?

Heck, when was the last time a major airline other than Southwest invaded a competitor’s turf and brought down airfares?

Nick Barnard
Member

Spirit? Airtran? Allegiant?

That being said if WN couldn’t make money on PIT-PHL and pulled out, why shouldn’t US raise their fares?

Nick Barnard
Member

Also, airlines are a for profit business. Not a charity.

noahkimmel
Member
VX is in EWR and PHL, B6 has stated it would add 100 flights to DCA if it were allowed and has increased its LGA presence, added DFW and took the carribbean from AA. I think you give too little credit to competitors. Change does not happen overnight, and market bearing fares may be high, but that is what it can bear. And if people have a problem, stop flying legacies. When jetblue entered JFK-CLT there was no competition, US now flies it 5x daily to b6’s 2. As long as consumers choose US to save $5, then they shouldn’t… Read more »
davidthomson_98
Member
Brett, Elliot is a total waste of publishable space, and it blows the mind that he continues to obtain writing assignments! HOWEVER, even though you are normally very balanced and objective, having read you over the years you are a America West/US Air loyalist and a Parker fan-boy and you rarely if ever criticize them. I am willing to bet that if AA were the airline taking over US, you would be all over this merger criticizing it big time! This merger IS bad for the traveling public as all are. Leaving only 3 major US carriers or 4 with… Read more »
BW
Guest

He’s also worked for United. Does that make him biased against United too?

If all the old hubs like MEM, PIT, CVG, and STL were profitable in today’s reality, they’d still be hubs. You think an airline is going to elect to de-hub an airport just to spite you? Please. It’s very simple: routes that make money stay, routes that don’t make money go away (outside of artificial forces like slot controls). Just like airlines that make money stay, and airlines that don’t make money go away.

Jim
Guest

Then how is Virgin America still here?

SAL
Guest

Virgin America faces a very uncertain future.

David M
Guest

I think Brett would be right to be critical of the merger if it were the current AA management team that will be running the combined airline. This is the team under which American has been getting worse over the past few years. Compare this to the US management team, which has been making US Airways better.

John G
Guest

Cranky, you mention RDU-BOS? Interesting. The reason fares are low on that route is NOT US Airways, it’s Jetblue, which also serves the route nonstop. It has nothing to do with US Airways keeping fares low.

Check out where US does NOT compete with an LCC. RDU – PHL for example. Nonstop on that route on July 16 is $385.

US Airways prices low to match competition, period. Where they do not compete with Jetblue, Southwest/Airtran, or Virgin, they often price tickets to an exorbitant level.

johnny
Member

I vote that MTV bring back Celebrity Death Match and invite you and Chris Elliott to duke it out.

Karl Dring
Guest
You might be a cranky flier but how much airline/travel experience do you have? And, what are your qualifications for refuting anything? As someone with over 35 years in senior positions in the airline and travel industry, I can tell you and your readers that you’re missing significant subtlteies when you talk about mergers. I’ve been a part of mergers, acquisitions, and bankruptcies and the AA-US merger will, without question, move us to an oligopoly situation in the domestic industry. The difference between this and the past is that now we’re getting down to a very small number of controlling… Read more »
Consumer Mike
Guest
Karl, I do not have the internal airline experience you state you have. However, I totally agree with your blog. As a consumer I cannot see any long term benefit for the flying public. I am very fearful of the future cost of air travel, availability, cities serviced, added new fees, basic customer comfort. Losing competition is NOT a positive thing for consumers. Never is. Candy coating the creation of a mega airline run by the likes of Parker , O’Leary (Ryanair) or someone similar will only lead to a bad future for air travel. Karl, your opinion and others… Read more »
DesertGhost
Guest

I prefer to see four strong competitive airlines instead if the fragmented mess we’ve had in the past. All the old business model produced was a string of bankruptcies and underinvestment.

Gary
Guest
Somewhere earlier in the train of comments, someone essentially said, “what would you prefer, two weak airlines or one strong one?” To Karl’s comment, that is the “fundamental truth” of this. and two weak ones will have a hard time competing with invigorated (due in no small measure to mergers) UA, DL and WN. I too have been very much on the inside of airline mergers, bankruptcies and acquisitions. They are messy and there is a lot of dislocation and corporate and personal heartache. But the market drives the demand. And yes, these afford career and financial opportunities for lawyers,… Read more »
Consumer Mike
Guest

Gary, I certainly agree with you that it is not fair or appropriate top attack Cranky. He has allowed us, by means of establishing this BLOG, to exchange views, opinions and complaints.

Half the time Cranky and I do not agree on airline issues/matters, but I respect his comments, information and opinions. Everyone of us has the previlage and opportunity to have our say (within reason) on this Bully Pulpit.

Friend of Shena
Guest
I agree with Gary’s comment that “two weak ones will have a hard time competing with invigorated (due in no small measure to mergers) UA, DL and WN.” Consumers will pay the price sooner or later. I’ve always liked this blog because Cranky straddles a line between the business side of the airline business and the customer experience side. While I think calling him a Parker fanboy is inappropriate, his admiration of Parker seems to be from a business side, hardly from a customer/flying public side where he does have a poor reputation. Its Parker’s challenge to transition US to… Read more »
kelty
Member

I don’t recall any benefits for consumers from mergers except that none of the participants went under.

I still think it would have been better to merge two successful airlines; Alaska and US Airways. They could have provided great service from Hawaii to Europe.

Consumer Mike
Guest

I personally would support any reasonable plan that would be beneficial to consumers. Good service at competitive prices, servicing as many cities as possible should be the goal.

John G
Guest

The problem, Mike, is that mergers aren’t about good service at competitive prices, serving as many cities as possible. Mergers are about making as much money for the airline as possible. It’s not intended to be beneficial to consumers.

Bill shea
Guest

A new National Aviation Commission (NAC) is needed now. FAA should be removed from USDOT (too busy with surface modes) and report to a new five-member NAC
that reports directly to the president. All federal aviation activity will be transferred to the NAC. The NAC will be accountable and responsible for national (internatio0nal aviation planning, policy, promotion of USA aviation around the world and vision for the future.

Respectfully,
Bill Shea
Woodland, CA 95695

Ted Dasher
Guest

One overlooked fact is that this will create a third airline with truly comprehensive coverage of the US which will certainly promote competition for those many who prefer to consolidate travel with a single airline.

Realist
Guest
Brett, I?m not going to comment on the ?fares rising? or loss of service parts of your piece since many others already have, other than to say: I suspect the new AA will be able to increase revenues by grabbing business travel market share in lieu of drastically increasing fares. Of course that?s what everyone is banking on to make this merger worthwhile but I doubt Parker/Kirby will be able to boost revenues as much as they sold to AA?s creditors and union leaders. The point I want to make is that, while criticizing another blogger for invalid assumptions, bad… Read more »
Realist
Guest

I meant to link to an article in the FTW Star Telegram regarding how Parker is dealing with the Eagle pilots.

http://www.star-telegram.com/2013/07/09/4991956/american-eagle-pilots-warned-they.html

Foxthomasb
Member
The merger will be great for AA, US and their stockholders. Any elimination of competition at this point will lead to further big price increases. Look at Houston and how this already high fare city has seen prices skyrocket since the United merger–and United was a bit player in Houston before the merger! The United merger coupled with the lack of fare competition from Southwest (as used to exist just a few years ago). In my uninformed opinion, the AA employees are kidding themselves when they swoon as they listen to Doug Parker sweet talk to them about how wonderful… Read more »
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