Lawmakers: Airline mergers may harm consumers

In this story: Consolidation concerns Diminished competition likely? RELATED STORIES, SITES

From Patty Davis
CNN Correspondent

WASHINGTON (CNN) -- As American Airlines' acquisition of bankrupt TWA took the spotlight on Capitol Hill Thursday, the executive of a rival airline offered a few words of warning.

"Consumers had better fasten their seatbelts and hang on to their wallets," AirTran Chairman Joe Leonard said at a U.S. Senate Commerce Committee hearing.

But American and Trans World Airlines executives argued consumers would be better served if TWA doesn't go belly up.

"In my view, the proposed transaction is the only comprehensive solution that adequately serves the consumers in light of the harsh realities facing TWA, its employees and its retirees," TWA President William Compton said.

Consolidation concerns

When it announced the $500 million deal last month, American promised to keep most of TWA's promised 20,000 employees on the payroll and continue operating TWA's St. Louis, Missouri, hub.

But lawmakers say they're worried about industry consolidation. The American/TWA deal comes on the heels of another proposed mega-airline merger between United and US Airways.

"The bottom line is, when you look at this entire array of mergers that's on the table, it's going to suck up most of the competitive juices that are left in the airline sector," said Sen. Ron Wyden, D-Oregon.

Sen. John McCain also expressed concern.

"This would result in two airlines controlling approximately 50 percent of the U.S. market," the Arizona Republican said.

Diminished competition likely?

The American/TWA deal would reduce competition in more than twice as many markets as it would help, according to an analysis by the U.S. General Accounting Office. The United-US Airways merger would cut competition in four times as many markets as it would benefit, the GAO estimated.

Even so, some passenger groups support the mergers.

"We approve of both American Airlines' acquisition of TWA and the United Airlines acquisition of US Airways on the grounds that it's important to preserve this airline service at a time when the airlines' service is running close to capacity," said David Stempler, president of the Air Travelers Association.

But congressional critics are skeptical. With record delays wreaking havoc on air travel and fewer airlines from which to choose, they say, consumers could pay the price of the mergers -- higher fares.

Transportation secretary urges closer
January 17, 2001
McCain criticizes proposed airline merger
July 27, 2000
United proposes buying US Airways
May 24, 2000

American Airlines
TWA
United Airlines
US Airways
AirTran Airways

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