Fasten your seat belts. The federal Department of Justice and officials in Texas have just made the nation’s skies a bit more turbulent. Along with attorneys general in five other states, they’re suing to block the merger of American Airlines and US Airways.
They should drop their case. By opposing the merger, these legal eagles are undermining competition within the air-travel market — to the detriment of consumers and airline workers alike. The airline industry is no stranger to turbulence, having suffered through 195 bankruptcies since 1978. American Airlines became the latest casualty when it entered Chapter 11 bankruptcy in late 2011.
A merger with US Airways would allow American to conclude its restructuring — and in doing so create a third large network carrier, making the U.S. industry more competitive internationally.
Nevertheless, the Department of Justice claims that the merger would be anti-competitive because it would reduce the number of major domestic airlines from five to four. Of course, Justice didn’t intervene to stop a similar merger between Delta and Northwest in 2008. Or between United and Continental in 2010. Or between Southwest Airlines and AirTran in 2011.
American and US Airways can’t compete on an equal footing against these larger, consolidated carriers. Delta and United, for instance, have been able to use their increased clout to eat into American’s share of business travel.
Further, the Department of Justice appears to be holding American and US Airways to a different standard than the other carriers that recently merged. Southwest and AirTran, for example, served many of the same markets and overlapped on more routes than American and US Airways currently do.
American and US Airways compete head-to-head on just 12 nonstop flights — out of the more than 900 routes they fly. The former serves 48 cities that the latter does not; US Airways hits 64 cities that American does not. The fact is that an American Airlines-US Airways merger would increase competition. The establishment of a third large network carrier would force both Delta and United, the current industry titans, to work harder to retain their existing customers — and thus create a more consumer-friendly market. A merger would also give existing customers of American and US Airways access to a more robust network.
Critics claim that a merger will result in price hikes or even the elimination of some routes. Texas Attorney General Greg Abbott, for instance, has expressed concern that “some areas in rural Texas could see their travel options reduced as a result of a merger.”
Actually, if American cannot proceed with its merger plans, serving less profitable rural markets might not be sustainable. American would have to consider shedding marginal routes, focusing instead on more lucrative service in major markets. Texas is set to benefit more than most states if the merger goes through. Headquartered in Fort Worth, American is the largest employer in northern Texas. The thousands of local jobs the airline supports — both directly and indirectly — would be far more secure under an airline with the combined weight of American and US Airways.
That’s why the Chambers of Commerce of both Dallas and Fort Worth are pressing Attorney General Abbott to drop his opposition to the merger.
Florida Attorney General Pam Bondi’s hostility to the merger is similarly puzzling. Officials at Sarasota-Bradenton International Airport, in the southwest corner of the state, believe that the merger would work to their advantage by giving the airport a long sought link to American’s Dallas-Fort Worth hub. That could help the airport make up for some of the 365,000 passengers — and $1 million in revenue — it lost when AirTran was absorbed into Southwest. Miami-Dade County Mayor Carlos Gimenez also favors the merger, noting that, with its Miami hub, “American Airlines is a vitally important part of our work force.” Miami International Airport’s director has voiced concerns that its bond ratings will suffer if the merger is blocked.
The business, political, and labor communities have all rallied in support of the merger of US Airways and American Airlines. Attempts to stymie it run counter to the needs of not just the airline industry but consumers, too. If the Department of Justice and its allies in the states are really concerned about promoting competition among airlines, they should drop their suit immediately.
By Captain Keith Wilson
Captain Keith Wilson is the president of the Allied Pilots Association.