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Justice Dept. Clears Merger of US Airways, American Airlines
American Airlines and US Airways Group Inc. have reached a settlement with federal regulators in the U.S. lawsuit seeking to block their $17.2 billion merger, a person familiar with the matter said. A deal with the Justice Department will be announced today, the person said, asking not to be identified because the negotiations are private. The two sides have been discussing airline concessions such as ceding flight slots at Washington’s Reagan National Airport, people familiar with the… (www.bloomberg.com) Más...Sort type: [Top] [Newest]
I don't think that these mergers are having much of an impact on the barrier to entry for new airlines... not any more than the natural barrier to entry that's pretty much the airline industry itself. It's hard to think of an industry with as high overhead and as volatile an environment as the airline industry.
If all new entrants have to avoid adding service into any one of the dozens of hubs of any one of the 4 major national carriers (or risk an aggressive anti-competitive reaction); then it would be a significant barrier to entry above and beyond the normal barriers of raising capital for such a substantial capital-intensive investment, etc.
I read a quote form Parker where he said there was too much competition between carriers. This merger just ended a whole bunch of it.
The decreased competition benefits all airlines.
After the merger is complete, any remedy needed to stimulate competition (or rather decrease anti-competitive behavior) should be industry wide. All large majors would be in a position to try to squash competion from much smaller rivals (and/or create a lot of pain for that smaller airline whilst trying to squash their competing service) into or from any of their major hubs where they have a dominant position. They can also respond strongly to competition from equal or nearly equal large competitors trying to greatly increase service into the dominant airline's fortress hubs. The response can be at the hub airport in question, or the fight can be brought back to the competing airline's own hub airports.
Regulations should be simple, should be minimally impactful, and should curtail retaliatory responses against much smaller rivals, trying to dissuade competing service.
After the merger is complete, any remedy needed to stimulate competition (or rather decrease anti-competitive behavior) should be industry wide. All large majors would be in a position to try to squash competion from much smaller rivals (and/or create a lot of pain for that smaller airline whilst trying to squash their competing service) into or from any of their major hubs where they have a dominant position. They can also respond strongly to competition from equal or nearly equal large competitors trying to greatly increase service into the dominant airline's fortress hubs. The response can be at the hub airport in question, or the fight can be brought back to the competing airline's own hub airports.
Regulations should be simple, should be minimally impactful, and should curtail retaliatory responses against much smaller rivals, trying to dissuade competing service.
Would be a SHAME if large airlines would extinguish smaller airlines at will.
At first, many though the DOJ was only after a deal all along, either to win concessions or to flex DOJ muscle (an attempt at image repair).
As there was more time to ponder the deal, it becomes clearer that the deal may not have been the best possible match for AA, bit all other majors are taken, do they're stuck with the US matchup.
Parker certainly needed it. Went from an AA executive to America West chief to US Airways chief, back to being chief at AA (while simultaneously making it the largest airline in the world again).
But the merger (along with the other 4-5 major mergers in the last few years) will reduce competition through consolidation, and may create a barrier to entry for new airlines, and will cause prices to increase.
The correct remediation should not be against American alone, but should be an industry wide action to protect competitive environment that's properly balanced between large airlines and small. Would be a sane if large airlines would extinguish smaller airlines at will.