Newspaper article The Christian Science Monitor

One Less Airline May Mean More Competition

Newspaper article The Christian Science Monitor

One Less Airline May Mean More Competition

Article excerpt

There's always a question whether bigger really is better. And in the case of the proposed merger between United Airlines, the nation's largest air carrier, and US Airways, the dominant East Coast player, the answer is somewhat paradoxical: It could heighten competition overall yet diminish it in some markets.

The proposed consolidation will undoubtedly have some impact on ticket prices. But, more important, it would accelerate the transformation of the industry into a two-tiered system of large and small carriers.

Some analysts worry the whopping $11 billion consolidation will give one big company too much market power in East Coast airports, from Philadelphia to Boston.

Studies consistently show that when one airline dominates a market - as Northwest does in Minneapolis - airline fares are consistently higher.

Merger plan may propel two-tier system of air carriers

But other analysts say the merger, which must be approved by federal regulators and the unions, will ultimately be good for customers. USAirways is in a shaky financial and operational position. This solidifies it, ensuring stability in the East Coast market.

"The merger with United solves all their problems at once," says David Stempler of the Air Travelers Association, a passengers' advocacy group in Washington.

Concern always rises when a competitor disappears from the market, whether through a merger or going out of business. But in this case, Mr. Stempler doesn't expect much impact on consumers because United and USAirways don't compete directly on many routes. In fact, he believes it will end up encouraging competition with American and other large carriers.

It's part of the transformation of the airline industry into a split market, made up of larger US carriers in international alliances and low-fare, shorter-haul competitors. "As long as we allow for competition among these giants and each of them participates in large international alliances, it can benefit consumers," he says. "But that's as long as the smaller, low-fare carriers also thrive."

This merger could also accelerate the trend by prompting another round of consolidations among the other major carriers. …

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