Airlines merger may lead to service cuts

The airline industry took a decisive step toward greater concentration Thursday with the announcement that American Airlines and US Airways have agreed to merge, forming the nation’s biggest airline, The New York Times reports. The merged airline, to be called American, leaves just three major carriers, including Delta Air Lines and United Airlines, able to offer extensive domestic and international service. But while airline executives argue that mergers are good for passengers because they bring more service to more destinations, some economists and consumer advocates warn that consolidation comes at a price for travelers. With fewer carriers, passengers have fewer options, and fares and fees are now more likely to go up, particularly for flights between midsize cities. And more cities, especially smaller ones, can expect to see further reductions in service. “It’s much easier to have tacit collusion with just three airlines,” says George Hoffer, a transportation economist at the University of Richmond. The last time the Justice Department challenged a merger was the proposed combination of United Airlines and US Airways in 2001. That merger was rejected on the grounds that it would reduce choice and possibly lead to higher fares. Since then, regulators have taken a different view, focusing on whether a merger would decrease competition on specific routes.