Why feds sued to block US Airways-American merger
The DOJ shoots down attempt to create world's largest airline, saying yet another merger is bad for consumers' wallets.
But the gauntlet has been thrown and the proposed US Airways merger with American Airlines is the target. Forget United joining with Continental, Delta pairing with Northwest or Southwest consuming AirTran. Some consumer advocates -- and now the federal government -- thought this one just had too much downside for consumers to allow to go forward.
Consumer advocate Christopher Elliott, who serves as ombudsman for National Geographic Explorer and is co-founder of the Consumer Travel Alliance, was glad to see the government step in and sue to stop the merger. He believes putting US Airways together with American was a bad idea that was going to result in less choice for consumers and higher prices.
"The Justice Department did its job," he said. "This is good for passengers. It means airfares will remain competitive and the relentless drive to squeeze every penny of ancillary revenue out of passengers will remain in check -- at least for now."
One of the big problems in this particular merger plan was just how many markets the two airlines were competing with each other. In Washington, D.C., for example the combined airline would end up with nearly 70% of all flights at Reagan National Airport. That domination, and concerns about how much airfares could go up where the competition would drop off, fueled both consumer advocates' concerns and those of the Justice Department.
Perhaps the biggest challenge that US Airways and American faced were all the mergers that had come before. Increasingly, the bulk of flights Americans have to choose from are concentrated among but a handful of airlines, and seeing what could happen if two more carriers were united as one seemed like something worth stopping -- for consumers' sake.
"I think it's clear that airline mergers have been bad for consumers," said Pauline Frommer, editorial director of the Frommer travel guides. "In some cities, flyers have seen their hub status eliminated -- and with it a large number of flight options. In many markets, mergers have led to an increase in pricing. Just as in any market, when you have less competition, you're going to have higher prices. It's Economics 101."
More from MSN Money:
Another thing I want to see government do is outsource prison, since they outsource a lot of things in America.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
Trying to revive their image, lenders are reaching out to the millions of Americans who are unbanked.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'