What would a US Air-American merger mean for you?
(MoneyWatch) If US Airways (LCC) and American Airlines (AAMRQ) merge, what will that mean for you, the beleaguered traveler? It probably won't surprise you to hear that it would likely lead to higher ticket prices. That's the assessment of CBS News travel editor Peter Greenberg, who spoke to MoneyWatch.com from the Mediterranean, where he is aboard the cruise ship Seven Seas Mariner.
MoneyWatch: Peter, is this merger really going to happen?
Peter Greenberg: First, you can't see something like this happening for 18 months. There will be antitrust review before American could even leave bankruptcy. That said, [US Airways CEO] Doug Parker has been meeting with American's creditors, and, according to sources I've spoken to, promising to make them whole. If the majority of those creditors are on board, he's in a good position to pull this off. He can go down to the judge in Delaware and say, hey, I've got a plan and the creditors are on board. And what judge is going to throw that out?
MW: So if a merger happens, would fliers see fewer routes? What would the airline be called?
PG: I would expect little change in terms of routes. There's not too much overlap between the carriers, and US Airways is much smaller, with just 8 percent of the market [American has 13 percent]. I suppose it would be in US Airways best interest to lose the name and go with American.
MW: What other changes would fliers see?
PG: There would be a merging of frequent-flier programs and a diminishing availability of reward seats. There's no point in giving away seats in a frequent-flier program if you are only three airlines. But the programs will stick around -- these companies actually make more money from frequent-flier programs than they make from being airlines. But instead of getting a free ticket, you'll get a toaster.
MW: And of course ticket prices will rise....
PG: Anytime you shrink capacity and jettison certain routes, airfares have nowhere to go but up. They're already climbing: The cost of a flight to Europe is up 22 percent over last year. From a business standpoint, a merger is a smart move for these companies. In the past you'd always have some low-cost carrier come in to fill the void [and keep downward pressure on ticket prices.] Now we don't have those. Maybe a small airline comes in and cherry-picks a few routes, but not many.
MW: So it doesn't sound like this is good news for travelers, while historically airlines have been a terrible business. Will this consolidation finally help them make money?
PG: All the major airlines are turning a profit right now. They're not doing it on ticket prices, however. The industry brought in $32.5 billion in revenue in checked bags and other ancillary fees last year.
MW: It hurts just to hear that number. Thanks, Peter.
