During a recent conversation with Charlie Rose, United Airlines CEO Jeff Smisek spoke on the benefits of consolidation in the airline industry.
Smisek opines the corporations’ increased profits means greater investments in the airline’s fleets, including new planes and global WiFi.
“That costs a lot of money,” Smisek said. “And to do that, you’ve got to make money to be able to make those sorts of investments.”
A proposed merger between the bankrupt American Airlines and US Airways is currently under review by the Justice Department. Last month, antitrust lawyer Joseph Alioto filed suit seeking to block the merger, claiming consumers would be negatively impacted. Although attorneys for both airlines decried the suit as baseless, the Government Accountability Office reported that nearly 1,700 routes between would lose a competitor as a result of the merger, affecting more than 53 million passengers.
When United and Continental merged in 2010, competition was decreased across more than 1,100 routes, according to the GAO.
Just how many airlines have caught merger fever? Take a look at this list.
While consolidation has undoubtedly helped the airline’s bottom line, how has it affected the passengers? With fewer airlines vying for your business and fewer flights to and from your destinations, passengers are at the mercy of increasingly large monolithic airlines that, like major banking institutions, are rapidly becoming “too big to fail.”
William McGee, a travel expert with the non-profit Consumers Union (publishes Consumer Reports magazine) raised those and several other issues when testifying about in front of a US Senate Judiciary meeting regarding United’s merger with Continental. McGee testified the airline mergers meant loss of service for many cities, higher fares, reductions in service quality and the threat of widespread service disruptions.