31 August 2010

Airline merger to bring higher prices

The immediate impact of the US Department of Justice’s approval of the proposed merger between Continental and United Airlines: less competition and higher prices for consumers.

"The merger still needs to be approved by the shareholders," said ChattahBox. "But with the stamp of approval from the Justice Department, it looks like a done deal."

In a statement, the Justice Department said it was satisfied that the airlines did not have so much overlap in their routes that consumers would be harmed by higher prices and limited flight choices."

The combination of the country’s third and fourth biggest airlines means the number of industry players - and options for fliers - continues to shrink, despite the government’s position.

"Upon completion, the proposed $3.17 billion merger will leave just four traditional carriers in the US, and possibly three if American Airlines responds by bidding for US Airways, as some analysts predict," said ChattahBox.

The Justice Department’s statement said a "thorough investigation" was conducted to ensure competition survived the merger:

"The proposed merger would combine the airlines’ largely complementary networks, which would result in overlap on a limited number of routes where United and Continental offer competing nonstop service," said Justice.

Once the two airlines merge, the new company flying under the United banner would become the world’s largest airline.

By David Wilkening