American Airlines, US Airways merging, if regulators approve
By: CBS News
Updated: February 14, 2013
The combined carrier will be called American Airlines but run by US Airways CEO Doug Parker.
The airlines announced their deal Thursday.
It reduces the number of major U.S. airlines to four.
Although airlines tout such consolidation as a way to cut costs and expand service amid intense competition, whether industry mergers raise fares is an open question, reports CBS News correspondent Sharyl Attkisson. Many analysts say they do, because reduced competition in any business often results in higher prices. One study found that ticket prices went up more than 20 percent between Detroit and Atlanta after Delta bought Northwest. Fares went up more than 30 percent on routes between Chicago and Houston, as well as Newark to San Francisco, after the United-Continental deal.
In seeking to run more efficiently, merging airlines also often cut capacity and eliminate routes.
Other analysts are more optimistic about the potential benefits to travelers. They say the three largest U.S. airlines still must compete with discount carriers such as Southwest (LUV), which has flourished for years by offering low-cost flights and no-frills service.
The consolidation trend is largely blamed on the price of fuel. Oil now costs so much more per barrel than it did 10 years ago that one analyst says the margin of profit on many flights has shrunk to the value of a single seat. That means an airline can lose money if it flies with one single empty middle seat. The days of elbow room are over.
American Airlines has been operating under court supervision since declaring bankruptcy in November 2011.