Competition concerns raised over US Airways American merger

Competition concerns raised over US Airways American merger

The prospect of a merger between American Airlines and US Airways has raised concerns about the damaging impact on air services.

In a white paper submitted to the Department of Justice (DOJ), the American Antitrust Institute (AAI) and Business Travel Coalition (BTC) claim the merger would pose a serious threat to competition.

In the 28-page report the groups claim the move could produce regional strongholds at key airports while starving smaller communities of vital services.

The paper does not call into question the legality of the merger but raises a number of issues it would like the DOJ to scrutinise.

This week BA parent IAG chief Willie Walsh backed the merger as opposed to a potential deal with Delta which he said US authorities were likely to block.

Daina Moss, AAI president, said a merger of the US’s fourth and fifth largest carriers poses potential concerns for competition and for consumers.

Should the merger go ahead the combined airline would command 20% of the market, raising further concerns over the group’s combined buying power.

Report co-author Kevin Mitchell, chairman of the BTC, said: “The legacy of a mega-merger would complete a troubling transformation of the domestic US industry to four powerful, closed airline systems (American, Southwest, United Continental, and Delta) that would control over 70% of the US market.

The White Paper argues a US Airways American combination would come amid a dwindling lowcost carrier sector and “increasing questions about whether Southwest any longer exerts significant competitive discipline”.

It urges the DOJ to appraise the impact of previous mergers, like that of Delta and Northwest and United and Continental and fares, service and choice.

Mitchell added: “DOJ might also focus on the potential adverse effect of the proposed merger on the carriers’ incentives to disclose ancillary service fee information.”

The report recommends that any claimed cost savings from the merger be carefully scrutinised. “The pandemic of integration problems in other mergers is a warning sign for this transaction,” said Moss.

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