Consumer advocate and National Geographic Traveler editor-at-large Christopher Elliott is the author of the upcoming book “How To Be The World's Smartest Traveler.” Elliott spoke to the Trib regarding the potential pitfalls of a US Airways-American Airlines merger.
Q: Is there any chance the Department of Justice might nix the merger?
A: When it was first announced, I would have said there probably is less than a 10 percent chance they would do that. But you have very contentious Senate hearings, you have a lawsuit that's been filed to stop the merger, the European Union and the (airlines') shareholders still have to sign off on it. DOJ approved the last three mergers, Northwest-Delta, Air Tran-Southwest and United-Continental. But the last time US Airways tried to merge with United, it was denied. So there is a precedent for denying a merger even when it looks like all the ducks are lined up. This could still fall through. I would put the chances right now at about 50-50.
Q: What are the inherent risks to consumers if the merger is approved?
A: Maybe a better question to ask is, have you ever come across a single airline merger that has benefited consumers in any way? Fares will go up, there will be (airline) layoffs and service probably will be reduced or eliminated in some cities. Those are the things that US Airways and American say aren't going to happen. But look back at the mergers that happened previously and you see that the promises made in the heat of the moment during the merger might not be kept.
Q: Are there any other potentially significant problems a merger might cause?
A: The new American would be a juggernaut, a massive company, the world's largest airline. The next time the airline industry falls on hard times, you can bet they will be out there with their hand out asking for loan guarantees or something like that. What's the government going to do, let the largest airline in the world go under? You can't do that. I think (US Airways and American) know they would have this critical mass if they merge. There are things you can do when you are the world's largest airline that you can't do if you're just US Airways and American operating separately.
Q: Is there a compelling business reason the airlines can cite as a need to merge?
A: There is no doubt the new American would be a stronger competitor to what they are calling the super carriers like the new United and the new Delta. But if you look at American now, it's in one of the strongest positions it's been in in years; it's come out of bankruptcy protection, it's got all these new aircraft orders. US Airways is doing absolutely fine as far as I can tell. They are making lots of money. So these companies don't really need to merge. I think they just want to merge.
Q: So Justice should be wary about signing off on the creation of an 800-pound gorilla?
A: Yes, because it would get to do pretty much whateiver it wants. It may not seem that way right now. They may be making lots of promises that this gorilla is going to behave. But it's still a gorilla. It still would be 800 pounds. So after the merger, it's going to do whatever it damn well pleases.
Eric Heyl is a staff writer for Trib Total Media (412-320-7857 or email@example.com).