Study finds U.S. airline mergers make good sense

WASHINGTON (Reuters) -- Mergers among top U.S. airlines would boost competition and create more choices for consumers, not fewer as often predicted, a survey released on Tuesday said.

The study by the Economic Strategy Institute, a free market-oriented public policy research group, analyzed 322 individual markets currently served by the six carriers with the largest networks.

Assuming consolidation into three carriers, it found competition would soar 74 percent among markets with access to two or more major metropolitan centres, or "hubs," while decreasing in 13 percent of cases and remaining unchanged in another 13 percent.

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United Airlines' pending purchase of US Airways has led rivals to say they might be forced to follow suit if the merger is approved by regulators. This has raised the prospect of early mergers between American Airlines and Northwest Airlines, and between Delta Air Lines and Continental Airlines.

Far from cutting competition as many fear, such unions would have the opposite effect given the "unique dynamics of airlines networks," Clyde Prestowitz, the president of the Washington-based institute and a top Commerce Department official under President Reagan, said.

"The net result of consolidation appears to be an increase in competition and more choices for consumers, which is hardly the doom-and-gloom scenario that some people propose would take place," Prestowitz, a trade expert and author, added in a statement.

The study concludes that consolidation would result in four airlines, including Southwest Airlines, with truly national -- as opposed to regional -- networks.

The current chop-up into regional networks limits the ability of multiple carriers to compete directly with one another, according to the study, prepared in collaboration with GKMG Consulting Services Inc., an airline consulting firm.

"The establishment of four national carriers would set the basis for vigorous, nationwide competition," said the study, titled "Consolidation, Connectivity, Competiton, and Communities."

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