US Airways, American Airlines wait for merger approval

Andrew Sachais | Contributor

Regulators are expected to approve the merger of US Airways and American Airlines, which would create the world’s largest carrier, reports Reuters.

The two airlines are in the final stages of negotiating an $11 billion merger and the deal is expected to be announced later this week.

If approved, it would mark the third major U.S. airline merger since 2008, bringing along with it the fear of an airline oligopoly.

The Justice Department has been lenient on blocking airline mergers in recent years, the article claims. The last one to be challenged was a proposed deal between United and US Airways in 2000.

However, change in the market place may make this deal different from the others. The number of mergers in recent years has left the consumer with few choices among booking flights.

“The fact that the market has changed means that they might take a tougher line,” says Alison Smith, an antitrust lawyer with McDermott Will & Emery law firm

According to a paper done by the non-profit groups American Antitrust Institute and Business Travel Coalition, Delta Air Lines with Northwest and United Airlines with Continental Airlines, did push up airfares in some cities.

Vaughn Cordle, an airline analyst with Ionosphere Capital LLC, expects airfares to go up in the long run if US Airways combines with American, but they may not go anywhere in the near future.

“It would be a mistake to naturally assume fares are going to go up just because they merge,” Cordle said,” the new airline will want to keep its fares competitive with rivals so it can fill planes on all its routes.”

That is not to say the merger will be all bad. It could bring more convenience for consumers traveling on certain routes.

The two airlines complement each other nicely, operating hubs in cities that the other lacks. For example American has exposure in Miami, New York, Dallas/Fort Worth, Chicago and Los Angeles, while US Airways has key operations in Philadelphia, Washington, Phoenix and Charlotte.

“They’ll have some great hubs, that will make the airline extremely appealing to both business and leisure travelers, and it will pose a credible challenge to airlines like JetBlue, United and Delta,” said Henry Harteveldt, a travel industry analyst with Hudson Crossing.

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