Congress has raised concern that if this merger goes
through American and US Airways combined would have over
70 percent of the takeoff and landing slots at Reagan
National Airport an airport south of downtown
Washington, D.C. Some have suggested that if the sale is
allowed to go through, the carriers should be forced to
sell off some of their slots in order that consumers
will have choices and there will be completion at the
airport.
In
the early years of the
1978 deregulation of the airline industry, it
brought about a number of startup air carriers,
resulting in competition which helped to reduce ticket
prices and improved carrier expansion in service
especially to smaller communities. However, that was
short lived. By the mid 80’s competition in the airline
industry began to erode as venture capitalist like
Frank Lorenzo began swallow up competition through
mergers (Continental Airlines, Eastern Air Lines,
Frontier Airlines, New York Air, Peoplexpress Airlines)
resulting in higher ticket prices and reduced services.
A
flurry of mergers and acquisitions occurred during the
1980s, when Delta and Western Airlines merged, United
acquired Pan Am’s Pacific routes, Northwest acquired
Republic Airlines, and American and Air California
merged.
Since 2000, American acquired the bankrupt airline TWA
in 2001, America West acquired US Airways in 2005, while
the latter was in bankruptcy; Delta acquired Northwest
in 2008; United acquired Continental in 2010; and
Southwest acquired AirTran in 2011.
Other attempts at merging since 2000 failed because of
opposition from the Department of Justice (DOJ) or
employees and creditors. For example, in 2000, an
agreement was reached that allowed Northwest to acquire
a 50 percent stake in Continental (with limited voting
power) to resolve the antitrust suit brought by DOJ
against Northwest’s proposed acquisition of a
controlling interest in Continental.
A
proposed merger of United and US Airways in 2000 also
resulted in opposition from DOJ, which found that in its
view, the merger would violate antitrust laws by
reducing competition, increasing air fares, and harming
consumers on airline routes throughout the United
States. Although DOJ expressed its intent to sue to
block the transaction, the parties abandoned the
transaction before a suit was filed. In 2006, the
proposed merger of US Airways and Delta fell apart
because of opposition from Delta’s pilots and some of
its creditors, as well as its senior management.
Since deregulation in 1978, the financial stability of
the airline industry has become a considerable concern
for the federal government due, in part, to the level of
financial assistance it has provided to the industry
through assuming terminated pension plans and other
forms of assistance.
From 1979 through 2012, there have been at least 194
airline bankruptcies, according to Airlines for
America (A4A), an airline trade group. While most of
these bankruptcies affected small airlines that were
eventually liquidated, 4 of the more recent
bankruptcies prior to American’s (Delta, Northwest,
United, and US Airways) are among the largest
corporate bankruptcies ever, excluding financial
services firms.
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