Experts don’t see dramatic impact on fares from air merger
11/12/2013 6:21 PM
11/12/2014 3:04 PM
Consumers aren’t likely to see a dramatic impact on ticket prices once American Airlines and US Airways merge, although American’s vice-like hold on Dallas-Fort Worth Airport will strengthen slightly to 86 percent of flights, up from 84 percent now.
“Generally speaking, companies merge to help themselves, not consumers,” said Seth Kaplan, managing partner of Airline Weekly, a trade journal. “This is going to be one of those times where it doesn’t mean it has to be a terrible thing for passengers.”
Possibly leading to moderating or even lower fares in North Texas, come later next year, are longer routes out of Dallas Love Field after the expiration of the Wright Amendment, Kaplan and others said. Then there’s room for expanded capacity for low-fare airlines using DFW, plus slots at Reagan National in Washington, D.C., and LaGuardia in New York going to budget airlines.
In a settlement unveiled Tuesday with the Justice Department, the airlines agreed to give up slots at Reagan, LaGuardia and several other airports in exchange for the government dropping its opposition to the merger. In Washington, Bill Baer, chief of the department’s Antitrust Division, said the deal would “dramatically enhance the ability of [discount carriers] to compete systemwide.”
But there will be losers, including passengers who travel to Charlotte, Philadelphia and Phoenix, where American and US Airways have competed with non-stop flights, they said.
Rick Seaney, CEO of Dallas-based farecompare.com, stressed that competition isn’t the only factor influencing ticket prices this year. When airlines in recent months tried to hike prices, they had to roll back in many cases because potential passengers refused to cough up more.
“Right now the big driver of ticket prices is the economy,” Seaney said. “Don’t expect much of a rise unless the economy perks up. And we don’t know when that will be.”
He also predicted a “pretty dramatic increase in capacity at DFW,” particularly with international flights, which could lessen pressure on fares.
The Consumer Travel Alliance, which in August strongly opposed the merger, on Tuesday applauded the settlement with the Department of Justice, calling the remedies demanded of the carriers unprecedented and going a long way to maintain competition.
Charlie Leocha, director of the non-profit advocacy group, predicted that dividing up gates at Reagan and LaGuardia between low-cost airlines will “change the competitive landscape in the aviation marketplace,” allowing for “more robust competition in the future.”
That said, the alliance “still maintains that denying the merger would have been best for maintaining competition levels between major carriers,” Leocha wrote in an email. “However, this merger with DOJ’s remedies may turn out to be a blessing in disguise for consumers and provide legacy carriers more competition than they bargained for.”
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