US - AA merger speculation prompts concerns

US - AA merger speculation prompts concerns

The business travel sector has voiced concerns over further US airline consolidation after reports of a potential merger between US Airways and American Airlines.

US Airways said it had an agreement with three unions representing pilots, cabin crew and ground handlers at American in a move which would create the world’s largest airline by passenger numbers.

American fell into Chapter 11 bankruptcy protection last November and chief executive Tom Horton has said he did not think it was appropriate to consider a merger until after the airline had restructured.

But the unions said: “We are pleased to confirm our support of a possible merger between our airline and US Airways.”

Such a deal would reduced planned job cuts at American, saving around 6,200 positions while management wants to see the workforce trimmed by 15%.

American is due in court today to try to void existing contracts it has with workers.

The Business Travel Coalition called on the US Department of Transportation to study the consequences of airline mergers in the light of the US Airways-American proposal.

BTC has testified in Congress and has generally opposed domestic US airline industry consolidation including the proposed 2000 US Airways/United Airlines, 2006 US Airways/Delta and 2008 Delta/Northwest Airlines proposed mergers. Two of those merger attempts were blocked.

Chairman Kevin Mitchell argued that industry consolidation has helped lead to a material reduction in service to mid-size communities and pushes up fares.

“Another pernicious effect of airline industry concentration is the ability of airlines to ignore the demands of their most valuable customers,” he said.

“For example, since 2008, when US airlines began to aggressively unbundle their product and offer ancillary services, despite corporate buyers’ substantial purchasing power and calls for ancillary fee transparency, airlines have refused to provide this fee information in a salable format to the marketplace.

“The ability of suppliers to ignore their very best customers’ needs points decidedly to a failed market.

“As such, a critical determination is how much more consolidation is workable with respect to an objective of restoring and maintaining a functioning competition in the marketplace for commercial air transportation services,” added Mitchell.

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