Continental-United Airlines Merger Could 'Send Airfares Skyward'

Airline passengers across the country should brace for higher ticket prices and fewer flight options if the merger of United and Continental goes through, analysts say.

The merger announced today still has to clear regulatory approval.

The combo would create the world's largest carrier and unseat Delta Air Lines, which recently completed its merger with Northwest. The airline, which would take United's name, would theoretically eliminate redundant routes and would have more control over prices.

Video: Continental and United airlines consider merger.
Continental and United Airlines consider merger

"For consumers, that improved pricing power may translate to higher prices, perhaps reversing the record since deregulation of declining real prices for air travel," said airline analyst Robert Mann.

In a news conference this morning, executives from both airlines said they didn't set prices before and won't set prices after such a merger.

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Travelers might also find it harder to get from one place to another as the airlines reduce the frequency of some flights and even decide to pull out of some markets.

For instance, Harrisburg, Pa. to Minneapolis, Minn. used to be served by seven airlines: AirTran, Delta, Northwest, American, US Airways, United and Continental, according to George Hobica, president of Thanks to the Delta-Northwest merger and a United-Continental's combination that route would now be served by five airlines.

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"In general, as consolidation progresses, there will be fewer flights between small cities and these will be operated by regional jets, if at all," Hobica said. "But nature abhors a vacuum and Southwest, AirTran and other discounters will come to the rescue on some routes if other airlines eliminate service."

Ticket prices are going to go up merger or not, according to Rick Seaney, CEO of airfare-search site and an columnist.

"Last year we were at decade lows so they have no place but to go up -- the question is how much," Seaney said. "The pendulum on supply and demand has swung in the airlines favor as summer bookings are very strong and corporate travel continues to perk back up to 2008 levels."

That said, ultimately, consumers will pay more because of a merger.

"One of the main factors in the price an airline ticket is competition, the lack thereof after this merger is likely to send airfares skyward," Seaney said.

The Push for Airline Mergers

The airline business has never been easy but in recent years the industry has suffered dramatic losses from high oil prices and the near-disappearance of business travelers, who often pay steep prices for last-minute tickets or first-class seats. Legacy carriers (United and Continental being two of them) have also fought so-called discount carriers like Southwest, AirTran, Frontier, Virgin America and JetBlue who fly younger, more-fuel efficient aircraft and have less debt. The solution has been to merge with the competition.

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