All Things Travel: Government Attempts To Ground Airline Merger
BOSTON (CBS) - The U.S. government is attempting to ground the merger of American Airlines and U.S. Airways and plans an anti-trust suit.
The surprise announcement on Tuesday apparently caught both airlines by surprise. It may delay the merger that was expected to be finalized by the end of the year. Both carriers said they will fight the proposed legal action.
Having given approval to major mergers by Delta, United and Southwest in the last decade, the government expressed that the new carrier might lead to less service and higher fares. The combination of American and U.S. Airways have nine combined hubs.
It seems doubtful that the proposed largest domestic carrier could maintain all of the nine operations. In almost all previous cutbacks at hubs has lead to a decrease in service and an increase in fares. Boston is not a hub city of either airline.
Less than a week ago, the creditors of American Airlines, now in bankruptcy, approved the proposed merger.
It may be that Congress and other government departments do not like what they see on the horizon. U.S. Airways controls about 70 percent in and out of Reagan Airport and United has cut about 10 percent of its capacity at the Washington region's two airports. Government officials use these airports weekly to return to their home states.
The Anti-Trust Division gave previous approval to three other major mergers: United and Continental: Delta and Northwest and Southwest and Air-Tran. The government is apparently saying enough already.
American and U.S. Airways both operate in Terminal B at Logan Airport. In recent years, AA has cut back on its New England flights to markets like Puerto Rico where JetBlue has stepped in and begun flights to San Juan.
When the merger is finally approved, American will challenge JetBlue as the number one airline flying passengers in and out of Boston.
U.S. Airways annually increases its winter schedule to the Caribbean islands and Mexico. Previous plans call for the carrier to leave the Star Alliance and join the Oneworld Alliance that includes British Airways and Japan Airlines, all of which operate flights at Logan Airport.
The best guess is that the merger will finally be approved with the two airlines giving up some of their routes.
All Things Travel reports with Bob Weiss can be heard on WBZ News Radio
