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Airline mergers are good for airlines and fares, study concludes

The nation’s airline industry has undergone so many mergers in the last decade that just four airlines and their regional carriers control more than 80% of all domestic air traffic.

And despite warnings from consumer advocates, the merger mania is having a positive effect on the industry and is partly responsible for keeping fares low, according to a new study by PWC, the auditing and consulting firm formerly known as PricewaterhouseCoopers.

The latest major airline merger was approved last month when American Airlines agreed to unite with US Airways to create the world’s largest carrier. Such unions, according to the study, has allowed airlines to eliminate unprofitable or redundant routes and invest in more fuel-efficient planes.

And when big airlines eliminate routes, low-cost carriers enter the market and force larger carriers to keep fares competitive, said Jonathan Kletzel, U.S. transportation and logistics leader for PwC.

“There have been some negative impacts on small markets but mergers have created more opportunities for low-cost carriers,” he said.

Domestic air fares have increased only 2% from the start of 2004 to the middle of 2013, a decrease of 0.5% when adjusted for inflation, the study found. However, the study did not calculate the added cost of bag fees and other passenger charges -- which has become a growing source of revenue for the industry on top of fares.

Government statistics show that airlines also have improved their on-time arrival performance and reports of lost or damaged bags are down.

Not everyone agrees with the study’s conclusions.

“I think the study is pretty flawed,” said Diana Moss, vice president of the American Antitrust Institute, which opposed the merger of American and US Airways.

Although fares have remained stable on a national level, Moss said the study notes that prices jumped by up to 19% in some markets, despite the presence of low-cost competition.

She also fears that the consequences of the mergers have not yet been felt. “I do think we will see fare increases and further capacity cutbacks,” Moss said. “It’s going to take a while to percolate through.”

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Copyright © 2014, The Baltimore Sun
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