The Fat Lady Has Not Yet Sung…

Also Arizona and Texas are joining the suit.

In all honesty – as much as I hate the merger – they have every right to merge if they think it will be better for them. No real monopoly is being created since there are other serious contenders. That is the honest answer (in my opinion). My wallet however hopes the gov stops the madness.

But if the gov really cared about driving up costs why don’t they put some kind of cap on what can be charged for flights as well as luggage and a million other things? Why don’t they go after Spirit for its obnoxious fees, since they feel they can regulate business anyway? That my be too smart for the fed.

@wiggle room,
This creates oligopoly, not monopoly. Fewer big players => easier to control the market and drive up profits, margins and fight competition.

In my opinion I think they have every right to do this. Do you want the government should regulate your business?? Its a free country and everybody is allowed to do whatever they want with their business. MIND YOUR OWN BUSINESS!

@wiggle room
Your argument with spirit airlines is incorect because they charge these ridiculous fees in place of a higher fare. So they come out with the same profit/seat as ua/AA/dl etc. the fare is just broken down differently

hi dan how do you get lifetime star alliance gold from us airways

@Dan
What is “the easiest path towards (lifetime) Star Alliance Gold elite status”?

In my opinion the government should lower taxes from airfare, so it would be cheaper….. if they care so much for are money.

So what will all people who stocked up with US airways miles, with the calculation that it will become AA miles do???? 🙂

They seems to have something against U.S. airways…

@yossi:
http://www.dansdeals.com/archives/19282

@moshe:
Pray that USAirways doesn’t devalue their award chart anytime soon?

@It’s Me:
They let them merge with America West. They just don’t want them messing up American or United 😀

Dan, as much as you and I and everyone else would hate to see this merger happen, I do strongly believe in capitalism and a free market.

I agree with the comment above, that if the government is looking to regulate, how about cracking down on luggage charges?

-How about cracking down on unions?
-How about drilling for gas so that the price of jet fuel will come down?
-How about lowering insane airport and security taxes and fees so that the airlines don’t pass this on to the customer?

@Capitalism:
I hear ya 100%
But where do you draw the line?

Let this go through and then allow American to merge with Southwest in 5 years? And then Delta to merge with United? Capitalism left completely unchecked isn’t always a good thing. We could very well wind up with just 2 airlines later this decade if left to market powers and that will make air travel unaffordable for the masses which ultimately hurts the US economy.

I think the DoJ is signaling that enough is enough with this lawsuit. Perhaps they realize that they went too far by allowing the Continental+United merger.

this is all about anti-competitive behavior. There are laws in place that protect consumers against events like this which decrease competition and increase prices. Unlike car rental and the number of mergers that have taken place there, the airline industry is NOT a commoditized industry and so creating huge behemoths like this one would prevent customers from selecting specific routes on their preferred carriers.

Myopic view, Dan. Stronger, more profitable, more stable airlines benefit consumers. Yes, there’s a *chance* that prices could be higher, but when airlines can’t raise prices to needed levels, you see bankruptcies, declining service, etc. Remember the past decade? The many mergers over the past decade finally have fixed things where airlines are a sustainable business, and yet prices remain near historical lows. And this is despite a recession. Here’s to hoping Big Government gets out of the way and allows the market to operate as it should. Consumers will benefit.

@Saul S:
A chance?
Airfares have risen dramatically over the past 5 years with the DL/NW, CO/UA, and WN/FL mergers.

Airfares at my hometown CLE are up 16.3% in that period while capacity has been cut by 21.1%.
DTW airfares are up 19.4% while capacity is down 16.9%.
SLC fares are up 14.2% while capacity is down 22.6%.
EWR fares are up 11.1% with capacity down 5.7%.

Airlines are once again turning a profit. Nobody is asking to break the mergers of the past decade apart. But further consolidation in the industry will just result in an oligopoly situation with out of control airfares.

Since I made this post the DoJ has signaled that it has no intention of settling and will fight for consumers:
http://aviationblog.dallasnews.com/2013/08/justice-official-an-injunction-not-remedies-is-the-best-medicine-for-us-airways-american-airlines.html/

I’m generally a free market guy when it comes to business, but this is an industry with humongous barriers to entry and it’s a critical part of our infrastructure.
I sure hope this merger is shot down.

@moshe: Yeah, and their award availability isn’t much better than Delta’s Skypesos.

@Joey:
That’s completely untrue.

Perfect summary of why this merger affects customers and how it’s bad for all:

http://finance.yahoo.com/blogs/the-exchange/us-airways-american-wrecked-own-merger-183921713.html

the whole thing is a joke

Sorry Dan, but you should leave the economics to the professionals. Any objective observation of the history of anti-trust law would tell you that rather than serving the interests of the consumers it only serves regulators and the other competing industry interests.

Aside from all that is the ethical question of using government coercion to remake what a very-narrow group of self-interested “regulators” think is best, rather then letting the profit/loss motive steer the industry by the choices made by billions of consumers, a decision which can hardly get more democratic than that.

To even believe that so-called regulators know what is the optimal level of competition is what Friedrich Hayek labeled the “pretense of knowledge”.

@iceberg:

I don’t claim to be an economics major though I do have an MBA. And I wrote many papers on the airline industry while pursuing that.

The competing industry would love this merger to go through.
Getting rid of USAirways would allow them to charge far more money to fly.
How does blocking the merger help them? Delta and United are crying today, trust me.

All I’m saying is that blocking this merger is a boon for consumers. Continuing down the merger path that has eliminated dozens of airlines since deregulation will lead to there being just 2 remaining airlines that can charge anything they want while destroying their mileage and elite level programs.

Perhaps it has been justified until now in order to allow them to become profitable but the DoJ was always going to have to step in at some point. This is the straw that finally broke the camel’s back.

Interesting snippet from the DoJ suit (which makes for a fascinating read by the way with tons of private emails made public):
http://online.wsj.com/public/resources/documents/airlinescomplaint0813.pdf#page=29

“US Airways also plans to institute its fees ($40 on average)
for the redemption of frequent flyer tickets on American’s
existing frequent fliers, who currently are not charged for
mileage redemption”

I hadn’t heard confirmation that the combined airline would charge those “award processing fees.”

More interesting stuff from the suit,

” In Congressional testimony, an industry analyst stated that he did not believe the merger would cause reductions in Cleveland. On June 18, 2010, upon seeing the
testimony, US Airways’ CEO wrote an email to other US Airways executives stating, “surely these guys [United/Continental] aren’t really planning to keep Cleveland open. I’m hopeful they’re just saying what they need to (including to [the analyst]) to get this approved.”
United and Continental closed their deal on October 1, 2010.
The combined firm has reuced capacityat nearly all of its major hubs(including Cleveland) and at many other airports where the two airlines previously competed”

They need to undo delta/northwest & united/continental to be fair to aa/us.

@q:
At first glance it does seem unfair, but there comes a point in time when the market as it would be after one more merger will be irreparably harmed.

The DoJ makes a good case of this being the time to draw the line:
http://online.wsj.com/public/resources/documents/airlinescomplaint0813.pdf

The airline industry already is a monopoly. Has any flown out of Dallas lately? You basically have to fly American if you want a non-stop domestic flight.

Those WSJ charts mean nothing unless they show seats for other airlines in the us and even around the world. Practically everyone cut flights regardless of mergers. Those charts are misleading.

I think that this merger should go through. First of all if there are less airlines and higher fares, smaller airlines come in I.E. JetBlue, Virgin, Southwest, and take big market shares and reduce the price dramatically. I think one of the big reasons this is being targeted is since DCA is a big hub for lawmakers and they are scared they would have to fly coach on the governments dime if prices go up. people would start driving or taking buses for short flights like Megabus. I think the government should step in to the NY-NJ area and regulate the tolls that are robbing people every day. $16-18 to cross a bridge, really? that bridge should be made of gold by now!!! The government should take less control of situations and let supply and demand help take over.

I don’t know if the merger should go through or not, but no one can tell me if the merger goes through we will have more competition

She may not have sung yet but she always ends up in the middle seat next to me

@g f:
10 years ago airlines like JetBlue and Southwest were true low cost options.
Now they’ve gotten smarter and realized they don’t need to charge low fares to fill up their planes. Just having some lower fees and a free bag or 2 will do it.

@Kevin:
😀 😀 😀 😀 😀 😀

“think 20K for a ticket to Europe and Hawaii”

dan, can you clarify this? In reviewing the award chart, I’m seeing US-Hawaii in coach as 17500 and Us-Europe as 20K off peak. Are you saying you can combine these for 20K or are you talking about separate awards?

@Jason:
You can combine them.

London-JFK, stopover, and then JFK-Honolulu 6 months later is 20K.