AA & US Airways merger is hurting the consumer
The U.S. domestic airline industry has been characterized recently by financial instability and mediocre service levels resulting in extensive industry consolidation. However, the recent $11 billion merger between two of the largest domestic airlines was not forged to save either of the companies from insolvency as has been the case of so many other airline mergers. The leadership of American Airlines and U.S. Airways explain that the pending merger simply makes the newly formed mega-airline more competitive within its industry. While the merger brings a few anticipated consumer benefits, the majority of industry experts deny that the business move bodes well for domestic fliers in general. Here are some reasons why they expect turbulence ahead for U.S. frequent fliers.
Inevitable Fare Increases
The reason that the U.S. adopted anti-trust laws within major industries was to curtail the formation of industry monopolies. The elimination of industry competition caused by monopolies nearly always results in undue price increases for consumers. After the proposed merger of American Airlines and U.S. Airways, the domestic U.S. airline market is left with only three major network airlines. The airline industry’s trend toward consolidation and the significance of this merger were not lost on regulatory watchdog organizations. The Department of Justice along with six other states filed a lawsuit against the merging airlines in hopes that a federal judge will stop what they called “a situation that substantially lessens competition for commercial air travel in local markets throughout the U.S.”
Reduced Opportunities For Both Airlines Miles Rewards Program Members
American Airlines and U.S. Airways both developed unique rewards programs for their faithful flying customer base. The merger between the companies will eventually impact the terms and conditions of their respective reward programs. Industry experts point out that U.S. Airways has about 30 million dividend miles members, and American Airlines has over 70 million members in its advantage miles program. Dividend miles members who have earned elite status on U.S. Airways are able to gain valuable upgrades by the airlines on available flights, but a heavy influx of elite members from American Airlines’ advantage miles program limits upgrade opportunities for many U.S. Airways dividend miles members.
Temporarily Overburdened Reservation System
Once the merger is consummated, it will likely take years to fully integrate the operations of both airline companies into one entity. During this time, fliers can expect a fair amount of growing pains with reservation orders. The resulting American Airlines company must update their information technology systems to accommodate the large increase in reservation orders.
Consumers gain a few benefits from the American Airlines and U.S. Airways merger that include more international flight destinations and possibly greater flexibility in earning their airlines miles rewards. However, long term merger results indicate higher fares and increased difficulty in obtaining direct flights to smaller U.S. cities for domestic airline customers.