US Airways, American Airlines merger could mean higher fares

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by JONATHAN BETZ

WFAA

Posted on February 7, 2013 at 10:05 PM

Updated Thursday, Feb 7 at 10:30 PM

DALLAS, Texas –– Analysts warn airfares will likely rise once American finalizes a merger with US Airways to become the largest airline in the country. 

“You’re going to be paying, in general, more for your airline tickets,” predicted Rick Seaney with FareCompare.com, an online travel site.
 
American’s merger will be the latest in a string of consolidations in recent years: US Airways and America West in 2005, Delta and Northwest in 2008, Continental and United in 2010, and Southwest and AirTran in 2011.
 
Assuming American joins with US Airways, as WFAA's Jason Whitely discovered Wednesday, nine carriers would have morphed to four since 2005.
 
“It’s not good because competition is one of the No. 1 drivers of price,” Seaney said.
 
Aside from price, he says, travelers can expect to see a list of changes, ranging from the websites to frequent flier programs. Seaney expects US Airways’ passengers on the Star Alliance program to be shifted to American’s OneWorld.
 
He fully expects glitches in the transition, like when United absorbed Continental’s frequent fliers last year. Passengers complained of massive problems with the computer switchover. Callers, trying to report problems, were put on hold for hours. Odd balances showed up in frequent flier accounts. The airline added hundreds of call center workers to eventually fix the problem.
 
Also varying fees between the two carriers will have to be sorted out. Already American and US Airways charge among the highest fees in the industry. Both share similar baggage fees –– $25 for the first checked bag –– but other random fees vary. For instance, a pillow and blanket costs $7 on US Airways. American offers them for free.
 
Yet a merger will also drastically expand American’s network and likely offer customers more direct flights to more destinations. US Airways officials have said the new company would keep the American Airlines name and the headquarters in Fort Worth.
 
“As far as I’m concerned, we’re going to have a healthy, much bigger, much more global company based in Dallas,” said Mark Drusch, an industry analyst.  “The Dallas hub will be a bigger hub managed by a very successful company.”
 
And some studies show airline prices may not climb all that much. A recent study by professional services firm PwC US concluded that airline mergers have actually not led to higher fares.
 
The report found average domestic ticket prices remained almost the same from 2004 to 2011, when inflation is factored in.
 
“The merger itself is unlikely to have a direct impact on airline prices,” said Jonathan Kletzel, one of the study’s authors.
 
He adds fares have climbed in recent years, but for reasons ranging from fuel prices to the economy. Plus extra fees have certainly soared, meaning passengers are in fact “paying a higher ‘effective’ price for their travel,” the study found.
 
Yet Kletzel’s research found fewer airlines didn’t necessarily mean less competition. Carriers tend to merge with companies that serve different cities.
 
“You won’t see a whole lot of overlap in their route structure,” Kletzel said. “So it’s really more of a complimentary addition to their network … You're seeing other competitors come in and take their slots.”

 

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