Wealth Finance

What would the proposed union between United and Continental Airlines mean for consumers? I recently testified on that subject before a panel of the Senate Judiciary Committee on behalf of Consumers Union, owner of Consumer Reports. If history is a guide, the merger creating the nation’s largest airline, would mean less competition among airlines, resulting in fewer flights, less consumer choice, and higher fares, particularly where the two airlines currently compete head-to-head.

In this blog, I’ll talk about the impact on consumer choice.

The new, merged airline is expected to maintain ten hubs, eight of them in the continental United States: Newark; Washington, D.C.; Cleveland; Chicago; Houston; Denver; San Francisco; and Los Angeles. Time will tell if the new airline decides to consolidate such an extensive hub network. But we do know that past airline mergers eventually led to hub closures and flight reductions, despite promises to the contrary:

• TWA’s former hub in St. Louis saw a reduction in total passenger traffic from 23 million in 2002 to 12 million in 2009. After American’s acquisition of TWA’s assets in 2001, it began reducing daily departures, from a total of nearly 500 down to just 36. Industry analyst predicted that St. Louis passengers and businesses would lose service. That’s exactly what happened.

• America West’s former hub in Las Vegas also shrank after that airline’s merger with US Airways. At its peak it operated about 140 flights daily, but now that figure is down to just 26 flights a day. Ten years ago Las Vegas was ranked as the 12th busiest airport in the world; it now ranks 23rd.

• Although the full effects of the Delta-Northwest merger have yet to be seen, Delta’s hub in Cincinnati already is experiencing cutbacks. In March the airline announced 840 jobs there were being cut. News reports state that 123 flights have been eliminated since the merger.

Consumers in these cities now have fewer choices, fewer flights, and fewer nonstop flights. And as the industry consolidates, consumers on many routes are losing the opportunity to “vote with their feet.”— William J. McGee

Tomorrow: Higher fares, declines in service and convenience.

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