You may have noticed recent news reports about Congressional unhappiness over the American Airlines/US Airways merger. Some suggested that this grousing – over the possible loss of non-stop flights between representatives’ districts and Washington’s Reagan Airport - is nothing more than political whining over personal inconvenience. That could be part of it, but not all.
The Creep of Consolidation
There is genuine concern about a potential loss of routes to and from smaller cities, and maybe even higher airfares – what one senator called “the creep of consolidation that threatens consumers” – but these worries are nothing new.
Air travel analyst Rick Seaney says it’s the legacy of the modern-day era of mega-mergers: “Over the past four years, we’ve seen eight large airlines combine into four, and that has consequences, intended or not.” Who pays the price? According to Seaney, “Both passengers and airline employees typically draw the short straws.”
Airlines and Smaller Cities – The Dilemma
Even before the Valentine’s Day merger was announced, Seaney noted that an American/US Airways union could mean loss of some air service and pointed to previous mergers where cities like Cincinnati and Cleveland were “defocused.” On the flip side, focus often becomes more intense on popular routes to the bigger hub airports. Said Seaney, “Mergers are about synergy, and synergy has become a code word for doing more with less, so it would buck a trend if there were not some cuts.”
Even the man who will run the latest merged carrier (which will keep the name, American Airlines) would not commit to the status quo indefinitely, although current US Airways CEO Doug Parker did not anticipate changes. According to a 40-page transcript of a March 19 Senate subcommittee hearing obtained by FareCompare, Parker explained that, “We will continue to fly to places we continue to fly today, with just one caveat” and he went on to explain this could be a change in market conditions such as falling demand or rising fuel prices. Fair enough, because – stuff happens.
The D.C. Airport Dilemma
Then there’s the issue of flights in and out of D.C.’s Reagan that has Congress especially unhappy. The merged American and US Airways would control about two-thirds of the available slots or gates at the airport, but the Justice Department – which oversees the merger process – may make the airline divest itself of some of these slots – which could mean fewer flights to smaller, less-profitable cities.
A spokesman for US Airways told FareCompare this week, “DCA is a profitable hub because it operates as a feeder operation with small community service as an important part of the operation. It is our view that other carriers can’t offer small community service profitably there without the connecting traffic a hub brings.” But as analyst Seaney notes, this will likely be an antitrust issue for final merger settlement.
Smaller cities are fighting back - mayors and chambers of commerce have urged the Justice Department to leave the slots intact saying it’s a matter of their economic livelihood. Then there is the convenience factor. As analyst Seaney points out, a legislator from Maine can now fly non-stop from Bangor to Reagan; if that option dries up, he can still get to the nation’s capital but only by first flying through Philadelphia or LaGuardia or even Detroit – the big, hub-type airports so prized by the airlines.
The full effects of any merger can take time with changes driven by ever-fluctuating economic realities. Example: Delta’s 2008 take-over of Northwest. As FareCompare reported earlier this week, Delta is downgrading its once-busy Memphis hub by slashing flights and jobs there beginning Sept. 3. As recently as 2009, the Tennessee airport boasted as many as 240 Delta flights a day, but by fall the total will shrink to less than 60. Airlines say, change is necessary to survival. Passengers need airlines to survive too but sometimes there is a price.