A recent merger proposal between American Airlines and US Airways has prompted an inquiry by the US Government Accountability Office. The airlines claim that because of several other high-profile airline mergers that have gone through in the last five years, this deal will level the playing field and raise competition between the flight giants that have been formed. The merger also intends to financially strengthen the airline industry overall.
However, many critics are concerned the merger will have the opposite effect by significantly decreasing competition, resulting in higher prices. The GAO study, Issues Raised by the Proposed Merger of American Airlines and US Airways, notes that even though the merging airlines “overlap on only 12 nonstop routes, no other nonstop competitors exist on 7 of those 12.” Whether or not this kind of reduction in industry competition outweighs the estimated $1.4 billion increase in net gain for the company remains to be decided.
Critics are also concerned that while US Airways is committed to serving smaller communities, the merger will force the company to drop a percentage of their service slots at airports and decrease the availability of flights to those communities.
The merger proposal must also undergo an antitrust review conducted by the Department of Justice before it can be approved. The airlines’ legal teams must be incredibly busy working on this.
This is some big-time business stuff. While most people will never be a part of such a huge business deal, even small businesses can benefit from the knowledge of a business lawyer.