On November 12th, 2013 a settlement was reached regarding the 17 billion dollar merger between American Airlines and US Airways Group.  This merger came with concessions that looked substantial but are actually very light in consequence.

The combined company, “American Airlines Group, Inc.,” agreed to give up 112 flight slots including 52 coveted slots at Reagan National Airport near Washington and 17 slots at La Guardia Airport in NY.  Essentially to make the merger happen, both airlines agreed to give up space in popular airports to allow for more competition amongst the airlines.

This merger would mean that the industry would be dominated by three major players in the industry, The new American Airlines Group, Delta Airlines, and United Continental Holdings inc.  Those opposed to the merger are afraid that these industry giants will cooperate on price and raise fare.

Critics believe that the settlement does little to address the demands of the Justice Department but…

“The Justice Department described the divestitures as the biggest ever in an airline deal. Bill Baer, the department’s antitrust chief, said that the settlement was better for competition than if the government had won a court injunction against the merger, because the concessions will allow low-cost carriers to expand at major airports.” – WSJ

This claim is supported with the idea that smaller low-cost airlines will now be able to enter big market airports and compete on price.  While it seems to make sense to the Justice department, it begs the question what is considered a low cost airline?  Now I can agree that airlines will absolutely fill the slots that are left open from the merger, but will that really reduce fares and prices?

It doesn’t seem likely as low-cost carriers target under-serviced airports to reduce airport fees.  If it were to enter a popular airport like Reagan National, its fares will be hiked up to adjust for the extra cost of providing flights.

Sources:

http://online.wsj.com/article/BT-CO-20131112-709747.html

http://en.wikipedia.org/wiki/American_Airlines