Ten years of mergers in the American airline industry is about the leave U.S. travelers with fewer choices. Once the deal between American Airlines and US Airways goes through later this month that will not only create the largest carrier in the world but only leave four mega-carriers in the industry. That’s about half the number there were a decade ago.
According to recent information released by Pricewaterhouse Coopers, that would not only mean less competition but also that the four carriers would fly over 75% of U. S. passengers. Nearly a third of the top 1,000 routes passengers would only have the option of one airline if they choose nonstop flights and only two choices on about half of the routes. Information released by JPMorgan Chase found that there are only 13 non-stop routes served by both US Airways and American. Eight of the routes will be served will continue to be served after the merger goes through.
The two airlines have been quite open about their negotiations and announce last week that they had reached a tentative agreement with the two unions involved. The three most represented unions for American employees have lobbied for the deal publically since last summer after there were demands for employee concessions from American execs. Top brass at US has been very vocal in its desire to purchase American as a way to join the mega-carrier ranks. The deal apparently has the backing of the many creditors of American’s parent company AMR after they filed bankruptcy in 2011.
So where does the deal leave fares standing? Evidently the consolidation won’t cause a spike despite what we might expect. Fares are expected to remain about the same if the deal does go through. The PWC study found that there has been a slower increase in airfares since 2004 despite a rise in fuel and labor costs.
One key factor is that the mergers and competition from non-direct flights have not really impacted overall capacity, thus keeping fares in check. Another factor is total fare transparency that allows the average passenger to play travel agent for themselves. Savvier flyers looking for a deal, especially business travelers give airlines less wiggle room when it comes to fare increases.
Will less competition be beneficial for both passengers and the airlines? It should definitely be an interesting situation to keep an eye on as the deal unfolds in the next few weeks.