Airline merger -- good or bad idea?

[Charles Kozierok]

So American and US Air want to merge into one company, raising the usual anti-trust issues and concerns about reduced competition and increased costs for consumers.

Normally I would be one of those concerned. But my admittedly subjective impression of the airline industry is that it's been teetering on the edge, as a whole, at least since 9/11. Having one strong airline might be better than two weak ones constantly on the verge of bankruptcy.

In terms of competition, has there really been much competition between air carriers in decades? Seems to me they are mostly "competing" with the price of oil, alternative forms of transportation, and people deciding to just stay home rather than pay any airline for a vacation flight.

 

[Londo_Jowo]

I can't see an issue with American and US Air merging, in past year or so United and Continental merged. I think the competition between airlines to get people to fly will keep prices at a reasonable level.

 

[dank69]

I see no problem with this merger. Still plenty of competition out there. Never had any problems with American. Hate US Air. Hopefully American drags US Air up rather than US dragging American down. Still doesn't really matter to me since I fly Southwest whenever I can.

 

[randomrogue]

I fly a lot. One thing that I've seen is that the big American carriers in general are some of the worst out there. Continental was awful. I stopped flying them around 2005. United is the worst I've been on recently and comes in as second worst ever after Aeroflot. I've sworn to never fly them again. American isn't as bad as either but is still pretty lousy when you compare to the Asian, European, and even Ethiopian airlines. Their employees are all great so no problems there but their planes, their in flight services, their food, and their reliability is terrible.

Something needs to be done. If they can provide a good carrier then I don't care about the anti-trust issues since we'll still have other international carriers to choose from. Domestically I fly Southwest so I could care less about the big carriers for that.

 

[Blackjack200]

Aren't there tons of carriers out there at this point? You have the two or three major US carriers, then you have all the foreign carriers, then you have the discount carriers, and finally you have regional carriers. Competition actually seems pretty strong to me. I can fly to Chicago for less than $300. That's pretty good.

 

[ElFenix]

airfare prices have actually decreased with respect to inflation. we pay for that with worse customer service, less space on the plane, much more potential for delay because the airlines need to keep the planes full and in the air, etc.

 

[McLovin]

I worked for America West Airlines as a Gate AGent when they merged with US Airways. Overall, it wasn't abad company to work for, but once the Union got involved and everyone "opened their eyes", everything wen't downhill quickly. I didn't stay employed with them for much longer after that and form my understanding, a lot of things changed for the worse.

I am hoping with the merger of American and US Air, that changes the attitude a bit.

 

[Bowfinger]

From my perspective, admittedly quite subjective, the problem with America's airlines is they've abandoned any pretext of delivering reasonable customer service (let alone excellent service). Flying commercially has become such an unpleasant experience that many people like me simply avoid it whenever possible. I will usually drive if it's less than six hours or so. It's simply so much more pleasant than enduring TSA security theater, hoping they don't delay or cancel the flight, cramming into an overbooked and cramped plane, hoping luggage arrives unmolested, etc. In short, commercial air travel today sucks, and I resent dumping perfectly good dollars into bad service.

I don't expect the American-US Air merger to change that in the least. It will almost certainly lead to higher prices, something I'd be OK with if there was a corresponding improvement in service. Unfortunately, there won't be. It will be higher prices for the same lousy service. I don't know what the solution might be, but further consolidation isn't it. I wish America had great trains like Europe. That might force airlines to deliver better service ... and if not, trains like EuroStar are a wonderful way to travel.

 

[EagleKeeper]

I gave up on expecting quality service from US Air and American both back in the 90s.

Keeping them separate keeps some competition alive and a few airports on the map.

 

[Charles Kozierok]

From my perspective, admittedly quite subjective, the problem with America's airlines is they've abandoned any pretext of delivering reasonable customer service (let alone excellent service).

I think it's a vicious circle.

As fuel costs go up, it gets more expensive to fly. People don't want to pay more, so the airlines start competing on the basis of price. To do this, they have to cut back on features and on staff. That makes the experience worse, so fewer people want to fly, increasing pressure on the airlines to cut costs further, etc.

Most people choose based only on price, and that's a recipe for a market where its product is treated like a commodity and service is secondary (at best).

There are some people who'd be willing to pay $100 more a ticket for a more pleasant experience. But not many.

 

[Mursilis]

From my perspective, admittedly quite subjective, the problem with America's airlines is they've abandoned any pretext of delivering reasonable customer service (let alone excellent service). Flying commercially has become such an unpleasant experience that many people like me simply avoid it whenever possible. I will usually drive if it's less than six hours or so. It's simply so much more pleasant than enduring TSA security theater, hoping they don't delay or cancel the flight, cramming into an overbooked and cramped plane, hoping luggage arrives unmolested, etc. In short, commercial air travel today sucks, and I resent dumping perfectly good dollars into bad service.

That's a common complaint, but I wonder how much of that service decline was driven by consumers' own behavior - selecting flights essentially based on price alone. That's certainly been my method. I've flown infrequently enough that in the past I perceived no real difference between the major carriers, and usually just choose the cheapest.

 

[momeNt]

What proof do they have of increased prices from reduced competition? For Standard Oil the price of kerosene steadily fell as their market share increased and the antitrust was ineffectual or if anything kerosene rose slightly. Shortly afterwards the data is tainted because of WW1, but gasoline prices took a while after WW1 to recover even with new technologies, although Ford and the greater demand for cars probably had a lot to do with that.

These antitrust suits only just add to the cost of government by giving the DoJ something to justify their budget with, and hurts the companies that are trying to defend against the government meddlers.

In short, I see no problem with the merger, and antitrust actions are and pretty much always will be boogeymen.

 

[Pohemi]

Initially, it makes me think, "decreased competition, higher cost to consumers". I'm not sure that's really the truth of the matter though, with how many remaining competitors there are.

I do share the sentiment with a few previous posts that our domestic carriers suck as far as level of service quality, and unfortunately it comes with the territory of lowering costs wherever possible.

As Bowfinger mentioned, it'd be nice to have better (read: more) train service available, but last I heard, Amtrak was on the verge of bankruptcy as well. Increasing costs of oil affects them as much as the air industry. While the company may still be running today, I don't expect that anyone else would be looking to start separate passenger rail services...it doesn't seem like an idea any corporation would even consider at this point. It's too bad our nation's rail system basically fell to the wayside as the interstate system was being heavily developed and expanded.

 

[momeNt]

Initially, it makes me think, "decreased competition, higher cost to consumers". I'm not sure that's really the truth of the matter though, with how many remaining competitors there are.

I do share the sentiment with a few previous posts that our domestic carriers suck as far as level of service quality, and unfortunately it comes with the territory of lowering costs wherever possible.

As Bowfinger mentioned, it'd be nice to have better (read: more) train service available, but last I heard, Amtrak was on the verge of bankruptcy as well. Increasing costs of oil affects them as much as the air industry. While the company may still be running today, I don't expect that anyone else would be looking to start separate passenger rail services...it doesn't seem like an idea any corporation would even consider at this point. It's too bad our nation's rail system basically fell to the wayside as the interstate system was being heavily developed and expanded.

Passenger rail just doesn't work as well in America compared to European countries. Our major cities are just so much further apart than any other countries. Germany is nearly 30 times smaller than the USA.

Hamburg to Munich is around 500 miles, similar to Chicago to Pittsburg. Train travel times are something like 5hr-45m for the German trains, and 9hr30m for Amtrak. Not sure how much of that is the speed of the train vs the number of stops. Just giving an idea.

 

[Exterous]

I see no problem with this merger. Still plenty of competition out there.

It depends on where you want to fly. Big hubs like ATL, ORD, LAX etc have plenty of flights in from all over the place and won't really be effected. Smaller destinations have really been suffering in terms of competition. They get utterly dominated by one airline with the others only offering a pittance of flights to their hubs. Then you get to pay these super cool things call 'Hub premiums' if you fly on the dominant airline. Getting decent flight options out of DTW means a plethora of odd positioning flights if you want to fly anything other than Delta. It's a giant pain in the ass and I doubt this is good news for hubs like that. US air was a star alliance member and AA is a one world member. Even if you keep the US airways flights you loose access to connecting flights within an airline alliance.

I fly a lot. One thing that I've seen is that the big American carriers in general are some of the worst out there. Continental was awful. I stopped flying them around 2005. United is the worst I've been on recently and comes in as second worst ever after Aeroflot. I've sworn to never fly them again. American isn't as bad as either but is still pretty lousy when you compare to the Asian, European, and even Ethiopian airlines. Their employees are all great so no problems there but their planes, their in flight services, their food, and their reliability is terrible.

We usually seem to be behind in terms of updating our planes as well. United still flies transcon configured planes to Hawaii when everyone else uses their international configurations. Nothing like jamming people in like sardines for the flight from ORD to HNL.

 

[CycloWizard]

I've had really bad experiences with American over the last 18 months or so but the exact opposite with US Air. I'm therefore hopeful about the merger since they said they're keeping the CEO of US Air. Just hope I can combine the miles...

 

[Exterous]

I've had really bad experiences with American over the last 18 months or so but the exact opposite with US Air. I'm therefore hopeful about the merger since they said they're keeping the CEO of US Air. Just hope I can combine the miles...

I haven't had the chance to fly US Air yet as I primarily travel Oneworld. Its been my experience that they have a lot of unmentioned transfer options that can add a lot of benefits if you work them correctly. For example favorable Avios bookings on Iberia of Aer Lingus without fuel surcharges or AA's forgiving international stopover rules. (Why yes I would like to fly business class from Charles de Gaulle to ORD and do a 9 month 'stop over' before continuing to HNL (Honolulu - still in business class) for the same price as CDG to ORD)

I actually hope that this will give AA a bit more muscle in DTW as I really dislike Delta. Phoneix or Charlotte won't really add any benefit to me but Philadelphia could as it has more European destinations than ORD does. (My only real option for Europe international from DTW Oneworld carriers.)

That said history tend on the side of reducing similar carrier flights out of a destination after a merger so we'll see

I am a little worried as AA's customer service has declined under their new CEO and I hope that doesn't bleed into US Air. Granted its still better than Delta but thats not saying much

Also - given that all other frequent flier miles and status generally get folded into the new company I don't think you have much to worry about

 

[ivwshane]

What proof do they have of increased prices from reduced competition? For Standard Oil the price of kerosene steadily fell as their market share increased and the antitrust was ineffectual or if anything kerosene rose slightly. Shortly afterwards the data is tainted because of WW1, but gasoline prices took a while after WW1 to recover even with new technologies, although Ford and the greater demand for cars probably had a lot to do with that.

These antitrust suits only just add to the cost of government by giving the DoJ something to justify their budget with, and hurts the companies that are trying to defend against the government meddlers.

In short, I see no problem with the merger, and antitrust actions are and pretty much always will be boogeymen.

During that time the monopolies were able to get their way via extortion. Don't like the price you have to pay to have your kerosene shipped on a train? Buy all your competitors and then threaten to not use the trains at all unless they lower their prices.

Do you need access to a major port city for your trains but don't own the only bridge into town? No problem, just don't allow any competitor trains on all the tracks that lead to the bridge until the owner caves.

Want to control the train industry indirectly? Purchase all the steel mills, raise prices and make your product the more attractive option.

Let's not forget all the workers who worked in the carious industries. You don't like your steel mill job because of long hours and low pay? Good luck going to another steel mill because they are all owned by the same guy and he ain't given you anything more.

Monopolies do more then affect the price of goods.

 

[momeNt]

During that time the monopolies were able to get their way via extortion. Don't like the price you have to pay to have your kerosene shipped on a train? Buy all your competitors and then threaten to not use the trains at all unless they lower their prices.

Do you need access to a major port city for your trains but don't own the only bridge into town? No problem, just don't allow any competitor trains on all the tracks that lead to the bridge until the owner caves.

Want to control the train industry indirectly? Purchase all the steel mills, raise prices and make your product the more attractive option.

Let's not forget all the workers who worked in the carious industries. You don't like your steel mill job because of long hours and low pay? Good luck going to another steel mill because they are all owned by the same guy and he ain't given you anything more.

Monopolies do more then affect the price of goods.

Those are basically all boogeymen again. Thought experiments not really founded in the real world.

The plight of the industrial worker is not attributable to monopolies either, it was more a massive influx of immigrants driving down the price of labor. Sadly labor works just like any commodity, except when there is an exceptional corn harvest nobody gives a shit that corn is cheap.

 

[JEDIYoda]

I never had any problems with United......
I prefer LOT or Lufthansa....

 

[ElFenix]

From my perspective, admittedly quite subjective, the problem with America's airlines is they've abandoned any pretext of delivering reasonable customer service (let alone excellent service).

airlines are essentially price takers for 2 of their 3 major costs: airplanes and fuel. they're constrained by price as most people flying Y fares choose almost solely by price. service is really the only cost they can control.

 

[Bowfinger]

airlines are essentially price takers for 2 of their 3 major costs: airplanes and fuel. they're constrained by price as most people flying Y fares choose almost solely by price. service is really the only cost they can control.

Oh, I agree that's why. The problem, I think, is the lack of competition. In an open, competitive market, suppliers will differentiate their products and services to appeal to different markets. In retail, for example WalMart offers a poor shopping experience but the lowest possible prices while Macy's offers a much better experience at higher prices.

We used to have far more U.S. airlines, competing with each other, offering differing levels of service. But after years of mergers and consolidations, the few remaining behemoths all raced to the bottom, leaving us with nothing but flying WalMarts. This merger will only make that worse, not better.

 

[fskimospy]

Oh, I agree that's why. The problem, I think, is the lack of competition. In an open, competitive market, suppliers will differentiate their products and services to appeal to different markets. In retail, for example WalMart offers a poor shopping experience but the lowest possible prices while Macy's offers a much better experience at higher prices.

We used to have far more U.S. airlines, competing with each other, offering differing levels of service. But after years of mergers and consolidations, the few remaining behemoths all raced to the bottom, leaving us with nothing but flying WalMarts. This merger will only make that worse, not better.

Well we used to have a highly regulated market that had good service but high prices. We deregulated it and this led to a lot of competition, and lower prices. It also tanked service. I'm not really sure what the answer is, to be honest.

Fun fact, did you know that the airline industry is net unprofitable for its entire existence? Here's a pretty amazing quote from Warren Buffett on the issue:

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

 

[ivwshane]

Those are basically all boogeymen again. Thought experiments not really founded in the real world.

The plight of the industrial worker is not attributable to monopolies either, it was more a massive influx of immigrants driving down the price of labor. Sadly labor works just like any commodity, except when there is an exceptional corn harvest nobody gives a shit that corn is cheap.

No those are examples taken from US history, they happened in the real world.

 

[ElFenix]

Oh, I agree that's why. The problem, I think, is the lack of competition. In an open, competitive market, suppliers will differentiate their products and services to appeal to different markets. In retail, for example WalMart offers a poor shopping experience but the lowest possible prices while Macy's offers a much better experience at higher prices.

We used to have far more U.S. airlines, competing with each other, offering differing levels of service. But after years of mergers and consolidations, the few remaining behemoths all raced to the bottom, leaving us with nothing but flying WalMarts. This merger will only make that worse, not better.

uh, no, that wasn't a competitive market, that was a regulated market. the competitive market has led to the reduction of service because, as it turned out, differentiating your product to Y fares isn't profitable. the vast majority of people are really only going to shop based on 2 things: price and flight availability/layovers.