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By Marilyn Geewax
Cox News Service
Published on Sunday, Nov 09, 2008
WASHINGTON: The Justice Department recently signed off on Delta Air Lines' combination with Northwest Airlines by concluding the deal should create efficiencies ''that will benefit U.S. consumers.''
But at a workshop that Justice sponsored last month, aviation experts presented evidence that airline mergers might inflict more harm on consumers than previously measured.
''A growing body of literature demonstrat[es] that at least some mergers of actual competitors can lead to price increases,'' said one of the academic research papers presented at the event. In addition, the loss of potential competitors through mergers can drive fares higher by ''substantial and significant'' amounts, it concluded.
President Bush's antitrust regulators originally took a tough stand, objecting in July 2001 to United Airlines' proposed takeover of US Airways. The Justice Department said the merger ''would reduce competition, raise fares and harm consumers on airline routes throughout the United States.'' The carriers called off the deal.
But since the 9/11 attacks, the White House has been receptive to mergers, permitting American Airlines' acquisition of Trans World Airlines later that year, America West Airlines' purchase of US Airways in 2005, SkyWest Airlines' acquisition of Atlantic Southeast Airlines in 2005, TPG Capital's purchase of Midwest Airlines this year, and now the Delta-Northwest deal.
The latest batch of research, however, could provide the incoming Obama administration with data to oppose mergers.
One study, by John Kwoka and Evgenia Shumilkina of Northeastern University, found that when USAir (now US Airways) merged with Piedmont Airlines in 1987, travelers got hit with higher fares as a consequence of the loss of actual competition, as well as from the loss of potential competition.
WASHINGTON: The Justice Department recently signed off on Delta Air Lines' combination with Northwest Airlines by concluding the deal should create efficiencies ''that will benefit U.S. consumers.''
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