Will AA/US Merger Mean More Competition?

The potential merger between American Airlines (AA) and US Airways (US) has sparked significant discussions in the aviation industry. One of the primary concerns raised by consumers, analysts, and industry experts alike is whether this merger will lead to "more competition" or if it will simply create a monopoly that could harm travelers. In this article, we will analyze the implications of the AA/US merger, focusing on its effects on market competition, pricing, and service quality.

The Landscape Before the Merger

Before delving into the merger's impact, it's crucial to understand the competitive landscape in the airline industry prior to the AA/US merger. The U.S. airline market has seen a trend toward consolidation over the last decade, leading to a few dominant players controlling a significant portion of domestic flights. The chart below illustrates the market share distribution among the major airlines before the merger:

Airline	Market Share (%)
American Airlines	18
Delta Airlines	17
United Airlines	15
Southwest Airlines	13
US Airways	10
Other Airlines	27

As shown, the top four airlines hold a significant percentage of the market share, indicating limited competition. With the merger, American Airlines and US Airways would combine their resources, potentially increasing their market share and further reducing competition.

Impact on Pricing

One of the most immediate concerns regarding the merger is the potential for increased "airfare prices". With fewer airlines in the market, there is a risk that the combined entity could raise prices without fear of losing customers to competitors. Historical data from previous airline mergers indicate that fares often rise after consolidation.

To better understand this phenomenon, consider the following table that outlines fare trends in the years following prior major airline mergers:

Merger	Year of Merger	Average Fare Increase (%)
Delta/Northwest	2008	5
United/Continental	2010	7
American/US Airways	2013	6

This data indicates that fare increases are a common outcome post-merger, raising concerns about the AA/US merger leading to higher prices for consumers.

Service Quality and Options

Another significant factor to consider is the impact of the merger on "service quality". Mergers can lead to improved service through the sharing of best practices, better scheduling, and expanded route networks. However, they can also result in a reduction of service options as airlines streamline operations.

For instance, after the Delta and Northwest merger, there was an expansion of routes and improved service offerings in some regions, but certain smaller markets faced reduced flight options. This trade-off between enhanced service in some areas and diminished service in others is a critical consideration for consumers.

Potential for Increased Competition

Despite the concerns about reduced competition, some argue that the AA/US merger could lead to "increased competition" in the long run. The reasoning is that the merger may create a stronger airline capable of competing with foreign carriers, thus broadening the market scope. A more formidable American Airlines could potentially lower fares and increase service options in response to international competition.

Additionally, with the merger, there might be opportunities for "new entrants" in the market. If the combined airline focuses on efficiency and cost-cutting, it may create room for low-cost carriers to capture market share by catering to price-sensitive travelers.

Conclusion

The AA/US merger presents a complex scenario with both potential benefits and drawbacks for consumers. While there are legitimate concerns regarding "increased airfare", reduced service options, and a decrease in competition, there are also arguments supporting the idea that a more robust airline could enhance competition against international players and possibly give rise to new market entrants. Ultimately, the long-term impacts of the merger will depend on how both airlines integrate their operations and how the market responds in the coming years.

As consumers, it is essential to stay informed about these developments and advocate for policies that encourage "fair competition" in the airline industry.