partners, it’s a match made in heaven – or at least 30,000ft in the air.
Airlines and US Airways announced today they have agreed on the terms of a merger, successfully
closing the deal in an industry now dominated by a few mammoth carriers. The
combined airline, which will retain the American Airlines name, will be the
largest in the world in terms of passengers carried (the airlines carried a combined 166 million passengers in 2011) as well as revenue (more
than $11 billion).
The new airline
stills need federal approval to ensure the partnership doesn’t drastically
reduce competition, but other airline mergers, such as the 2010 Continental-United
merger, sailed through government scrutiny, and analysts expect similar safe
But is it a
match made in heaven – or elsewhere? The marriage cements a decades-long trend
in the airline industry toward consolidation. Consider this: the US industry
has gone from 10 major airlines in 1988 to just three today: Delta, United and the
is a euphemism for fewer seats, and with fewer seats comes higher prices,” wrote Justin Bachman, reporter for Bloomberg Business Week.
this theory, the American Airlines-US Airways merger will bring about less
competition, less choice and higher prices. After all, the merger will leave
just four airlines – Delta, United, American and Southwest – controlling about
83% of US seats.
has also helped stabilise the airline industry, reported
the Wall Street Journal (WSJ). The industry’s three major mergers:
Continental-United, Delta-Northwest, and now, American-US, have produced “a
healthier industry with the prospects of sustainable profitability and
investment-grade credit ratings”
2013 looks as though it may be one of the most profitable years in recent
history for the airline industry, and a vibrant marketplace means good news for
consumers. Competition is likely to remain vigorous as discount carriers like
JetBlue and Southwest still account for about 37% of domestic flights, keeping
prices down. And, according
to the WSJ, even after three mega-mergers, domestic fares are actually 15%
lower than they were in 2000, adjusting for inflation.
ever after? Probably not. But after some initial turbulence, we expect the
American Airlines-US Airways marriage will be a healthy union in the long run,
with benefits for both the airline industry and consumers.