GAO: American, US Airways Merger Would Reduce Competition

american airlines us airways airplanes gao report merger reduce competition
LM Otero/AP
By DAVID KOENIG

DALLAS -- A government review finds that the merger of American Airlines and US Airways would reduce competition on more than 1,600 routes traveled by more than 53 million passengers.

That's a greater loss of competition than occurred with the 2010 merger of United Airlines (UAL) and Continental Airlines, an analyst for the Government Accountability Office told a U.S. Senate panel Wednesday.

Antitrust regulators at the Justice Department are reviewing the proposed American-US Airways deal, which also faces a vote by US Airways shareholders and would need approval by the federal judge overseeing American's bankruptcy case.

American and US Airways executives have defended their merger by noting that they overlap on only 12 nonstop routes.


But the GAO also considered connecting routes -- those with at least one stop. GAO analyst Gerald Dillingham told a Senate aviation subcommittee that if the merger is approved, competition would decline because there would be one less airline flying those connecting routes.

There is at least one other airline on most of those 1,665 routes, Dillingham said, including low-cost airlines on 473 of them. The GAO analyst said in his report that the merger also would create a new competitor with at least 5 percent market share on 210 routes affecting 17.5 million passengers, but he added that "the great majority" of those routes already have "effective" competitors.

US Airways Group Inc. (LLY) CEO Doug Parker, who will lead the combined company if the merger is approved, told the Senate panel that the deal would be good for consumers by creating a bigger airline with service to more locations than either American or US Airways can offer on their own. It would be the world's biggest airline.

"A broader airline network is better for passengers because it gives them more choices, a wider variety of services, and more competition on more routes," Parker said. He added that it would create a more powerful competitor for United and Delta Air Lines (DAL), which are much bigger than No. 3 American or No. 5 US Airways.

US Airways and American Airlines parent AMR Corp. announced the proposed merger in February and hope to complete it in August or September.

Sen. Jay Rockefeller, D-W.Va., chairman of the Senate transportation committee, said in a statement that Congress "must make sure that the advantages of a strong aviation sector benefit more than just shareholders."

Congress has no role in approving or rejecting the merger, although lawmakers can try to influence the Justice Department's decision. At Wednesday's hearing, much of the discussion revolved around the fate of Reagan National Airport near Washington, where the combined American and US Airways would operate about two-thirds of the flights although carrying only half the passengers.

The Justice Department could require the merged company to give up some takeoff and landing slots at National, but Parker warned that could prompt the new American to reduce flights between Washington and smaller cities. JetBlue Airways (JBLU), Southwest Airlines (LUV) and others could be interested in gaining slots at the airport.


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