Keeping watch over the friendly skies
Over the past few years we’ve gotten used to mergers of big airlines. Before 2005, fliers could choose from nine major U.S. airlines. Prices were relatively affordable. You could pop over to major European cities (yes, offseason) for less than $600 round trip, including taxes. Airfare sales were kind of fun – you could watch online and catch a $200 deal to Vegas. Seems like Bud and I were in the air more than on the ground back then.
But post-merger consolidations have reduced the number of major U.S. airlines to five. The proposed merger of American Airlines and US Airways that’s been in the news this week would have brought that down to four. But surprisingly (after all, airline mergers have sailed through regulatory hearings for years), the Department of Justice stepped in and mounted a legal challenge.
Huh? What happened?
The Backstory: By the mid-2000s, the airline industry was a financial mess. Very few airlines were stable, let alone profitable, and airline bankruptcies were almost ho-hum events. In the process of sorting things out, bankruptcy courts did their job of protecting creditors and the airlines; and ultimately the Anti-trust Division of the Department of Justice (charged with protecting consumers) agreed that consumers would best be served by allowing several mergers. The airline assurances all sounded so logical and promising – increased efficiency; lower fares; a happier, better-served flying public. Has any of this happened? Not so much.
Hence Department of Justice skepticism about the claims made by American Airlines and US Airways of the proposed merger’s benefits for those of us who fly – and the government’s willingness to draw a line in the sand.
Advocacy at Work: Department of Justice lawyers might well have come to this conclusion on their own, but it turns out they had persuasive input from several consumer advocacy groups, including a relative newbie: the D.C.-area nonprofit Consumer Travel Alliance (consumertravelalliance.org, 202-713-9596). CTA was founded in 2009 by Charlie Leocha, an author and travel expert who just happens to be a New Hampshire native and still visits frequently. Leocha spent a lot of time both on the Hill and on the phone, arguing (among other things) that this merger would shatter competition in hundreds of market areas in which American Airlines and US Airways have overlapping routes – the resulting single-carrier routing would allow the consolidated airline to increase fares almost at will. The rationales for the merger and against it are, of course, multifaceted, complex and subject to the interpretation of data bases and policy analysis. Nonetheless, I find it comforting that Leocha and his colleagues have a voice – and that the voice is speaking for us. I’ve signed up for the CTA newsletter (choose daily or weekly on the website), which provides insightful and practical information on travel. CTA also has an active ombudsman, Christopher Elliot (Elliott.org, firstname.lastname@example.org) who is affiliated with National Geographic Traveler. What better place to go to get a travel-related problem solved?
What Now? Not surprisingly, the airlines have vowed to press on and win – and the conversation is bound get media attention for a while. But Leocha says it’s over: “A stake has been driven through the heart of this monster deal!”
In the past, a situation like this might have resulted in the liquidation of one airline – in this case, American, since it has filed for bankruptcy.
But the airline industry is much more stable now, and Leocha says that both American Airlines and US Airways are very capable of surviving on their own – per their own CEO’s words. As for us, our US Airways MasterCard will still be our go-to card. A close call? Maybe!