Smaller Texas cities disagree with Abbott on impact of merger

Posted Tuesday, Aug. 13, 2013  comments  Print Reprints

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It took the proposed merger of American Airlines and US Airways to put Texas Attorney General Greg Abbott on the same side of an issue as the Obama administration.

Abbott, who has fought the White House on healthcare, voting rights and environmental policy, joined the Justice Department and attorneys general from Arizona, Florida, Pennsylvania, Tennessee, Virginia and the District of Columbia in a federal complaint claiming that the merger would hurt competition and result in higher fares for consumers.

The Texas attorney general, who has announced his plan to run for governor, said he’s particularly concerned that service to several of the state’s smaller airports served exclusively by American and American Eagle will be reduced.

“The proposed merger would result in decreased competition, higher airfares and fees, reduced service and downgraded amenities,” a news release from Abbott said. “The dollar impact nationwide could exceed $100 million a year.”

But the affect on smaller airports was not cited in the joint complaint. When queried, Abbott’s office noted general references to likely “capacity reductions” by a merged airline affecting consumers. However, in the complaint’s lists of routes that would presumptively be illegal under antitrust law, the smallest Texas airport cited is Austin. Many involved Dallas/Fort Worth Airport.

Bud Weinstein, an economics professor at Southern Methodist University, didn’t find Abbott’s position persuasive.

“The same arguments about abandoning small airports were made in opposition to the Delta-Northwest and United-Continental mergers,” Weinstein said. “But the Department of Justice didn’t object to those mergers.

“Some airports will lose or see reduced service with or without the AA-US Air merger,” he said.

Strangely or not, small markets dependent on American didn’t criticize the proposed merger or express fear that they’d lose flights.

“They’ve already done that — eliminated service to over 100 smaller airports,” said Kevin Pearson, interim president and CEO of the Wichita Falls Chamber of Commerce. His city is served exclusively by American Eagle.

“But what are we going to do, let American Airlines go belly up?” Pearson asked. “They’re bleeding red ink. What do you expect? With the merger, American’s got to do what American’s got to do.”

That said, Pearson predicted that Wichita Falls was too solid a market, citing an Air Force base, a state university and a sizable hospital complex that make the four inbound and four outbound daily flights viable.

“I don’t see any major sacrifices here,” he said. “That’s not to say that’s not going to happen. But I actually think the merger will make the combined airline stronger, keep more planes in small airports.”

Kelly Hall, president of the Longview Chamber of Commerce, said she didn’t have the data on American’s exclusive service to the city’s airport, although such flights are crucial to the business community. Over the years, they’ve been reduced from five inbound to four and now just two, she said.

“We continue to be proactive in our support of American Airlines and protective of the service we have.”

In Killeen, the 2010 merger of United and Continental airlines actually improved service, said John Crutchfield, president of the city’s chamber of commerce.

“We were affected in a positive way,” said Crutchfield, who noted that Continental’s propeller planes were replaced by United regional jets.

“To be competitive, the merged airline has to step up the service,” he said. “With our size market, mergers benefit us.”

Although Killeen is just one hour from Austin’s Bergstrom Airport, its proximity to Fort Hood, the country’s biggest military base, provides much air business, he said.

Barry Shlachter, 817-390-7718 Twitter: @bshlachter

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