Will Air Mergers Lead to Higher Airfares?

ByABC News
January 9, 2001, 5:18 AM

N E W   Y O R K, Jan. 9 -- If American Airlines does buy TWA, it will mean higher prices and possibly poorer customer service for airline passengers, say industry observers.

But industry executives say it could also help create more choice and convenience.

This would clearly reduce competition and increase concentration in the airline industry, said Paul Hudson, executive director of the Washington-based Aviation Consumer Action Project. Theres already not enough competition on price.

Hudson said many routes served by three or four airlines could soon see only two carriers after the wave of consolidation.

Sources Monday confirmed that Fort Worth, Texas-based American planned to buy money-losing Trans World Airlines Inc. after the St. Louis, Mo.-based carrier files for bankruptcy for the third time, perhaps as soon as Wednesday.

The Upside of Consolidation

The airlines have repeatedly said consolidation will allow them to offer more routes and more flights through an expanded national and international network, making one-stop travel more convenient for passengers on major and minor routes.

A source familiar with the negotiations who would only speak on condition of anonymity said American would pay United "slightly less" than $1.4 billion in exchange for 86 jets, joint ownership of the Washington-New York-Boston shuttle now operated by US Airways, and 49 percent of a new airline, DC Air, that would be spun off from US Airways.

Aviation Daily editor Michael Miller says the merger is a direct response to the proposed merger between United and US Airways, which is still being reviewed by the Department of Justice over antitrust concerns.

The TWA merger is not happening in a vacuum, said Miller. The merger would help United pass antitrust muster because it includes the nations biggest airline [United] divesting some of its assets.In addition, American would take over TWAs St. Louis hub, which should help passengers by easing congestion and delays at Americans hubs in Dallas and Chicago.