Air travel

Study: Airline mergers are good for carriers, fares

 
 
 <span class="cutline_leadin"> Coming together:</span> In December, American Airlines agreed to unite with US Airways to create the world’s largest carrier. A recent study said such unions enabled airlines to invest in more fuel-efficient planes and drop unprofitable routes.
Coming together: In December, American Airlines agreed to unite with US Airways to create the world’s largest carrier. A recent study said such unions enabled airlines to invest in more fuel-efficient planes and drop unprofitable routes.
Susan Walsh / AP

Los Angeles Times

The nation’s airline industry has undergone so many mergers in the past decade that only four airlines and their regional carriers control more than 80 percent of all domestic air traffic.

Despite warnings from consumer advocates, the merger mania is having a positive effect on the industry and is partly responsible for keeping fares low, according to a new study by PwC, the auditing and consulting firm formerly known as PricewaterhouseCoopers.

The latest major airline merger was approved in December when American Airlines agreed to unite with US Airways to create the world’s largest carrier. Such unions, according to the study, have enabled airlines to eliminate unprofitable or redundant routes and invest in more fuel-efficient planes.

And when big airlines eliminate routes, low-cost carriers such as Southwest and JetBlue enter the market and force larger carriers to keep fares competitive, said Jonathan Kletzel, U.S. transportation and logistics leader for PwC.

“There have been some negative impacts on small markets, but mergers have created more opportunities for low-cost carriers,” he said.

Domestic airfares increased an average of only 2 percent from 2004 to mid-2013 — a decrease of 0.5 percent when adjusted for inflation, the study found. However, the study did not calculate the added cost of baggage fees and other passenger charges — which have become a growing source of revenue for the industry.

Government statistics show that airlines also have improved their on-time arrival performance and their rate for losing or damaging luggage.

Not everyone agrees with the study’s conclusions.

“I think the study is pretty flawed,” said Diana Moss, vice president of the American Antitrust Institute, which opposed the merger of American and US Airways.

Although fares have remained stable on a national level, Moss said the study notes that prices jumped as much as 19 percent in some markets, despite the presence of low-cost competition.

She also fears that the consequences of the mergers have not yet been felt. “I do think we will see fare increases and further capacity cutbacks,” Moss said. “It’s going to take a while to percolate through.”

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