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Other views: Move to scuttle airline deal an overreaction

4:22 PM, Aug. 14, 2013  |  Comments
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The effort by the Justice Department and six states to block the merger of American Airlines and US Airways is likely to be a popular one. After all, the lawsuit announced Tuesday is aimed at preserving competition in an industry known for cramped planes and an annoying array of nickel-and-dime fees. And there is little doubt that an American-US Airways marriage, which would reduce the field of four major legacy carriers to three, would produce higher ticket prices on certain routes.

But there is more to this than preserving competition at all costs. If that were the only consideration, the antitrust enforcers should have blocked the previous mergers of United and Continental, Delta and Northwest, and Southwest and AirTran. They didn't.

The fact is, the post-deregulation airline industry has been plagued with too many players fighting for a toehold. All four major legacy carriers have been through Chapter 11 bankruptcy at least once, and American is still in it.

Consolidation has helped bring needed stability to an industry that just a few years ago was hemorrhaging money, struggling to cope with rising fuel costs, and plagued by flight cancellations, delays and spotty service. This history needs to be considered, and balanced against a desire to have more carriers.

Competition is great. But fliers will ultimately suffer if it leads to more instability, less investment in new equipment, and frequent flier miles that evaporate when a carrier collapses. The industry could well end up with two major players (United and Delta), with American and US Airways struggling to hang on.

Antitrust experts, using mathematical models to study competition, have long found that an industry of three is a huge improvement over an industry of two, but that a fourth makes relatively little difference.

The US Airways-American merger would still allow for three major legacy carriers, plus a fourth major carrier with a different business model (Southwest) and several niche or regional players, such as Alaska Airlines and JetBlue.

This three-plus scenario would be a suitable compromise between competition and stability. It is certainly the end result that industry analysts have anticipated for years.

The merger does, to be sure, raise some concerns. The combined airline would gain a formidable presence on the East Coast, with US Airways focusing on short hops and American focusing on longer flights.

The new company would be particularly potent in Philadelphia, New York and Washington. At Washington's Reagan National Airport, the combined airline would account for 69% of all flights.

This is reason to demand that the combined company shed some of its routes and gates as the price of anti-trust approval. Indeed, that might well be where the Justice Department and state governments end up. But their hard-line bid to scuttle the whole deal comes off as an overreaction, one that's not in the best long-term interest of the industry or its passengers.

USA TODAY

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