How Will Proposed Merger Affect Airline Passengers?
RENEE MONTAGNE, HOST:
And Americans looking to fly may be wondering how they'll be affected by a merger creating the world's largest airline. American Airlines and U.S. Airways agreed to become one yesterday in a deal valued at $11 billion. It's a merger that also means less competition. As to whether that's a good or bad thing, NPR's Dan Bobkoff reports: It's complicated.
DAN BOBKOFF, BYLINE: The past eight years have been merger mania for airlines: Delta and Northwest, Continental and United, Southwest and Air Tran, and now U.S. Airways and American. If this latest deal is approved, we'll have just four major domestic airlines. You might think all this is going to lead to much higher prices for flights, so you might be surprised to hear this.
JONATHAN KLETZEL: We didn't see any evidence that these mergers have had a direct impact on prices.
BOBKOFF: Jonathan Kletzel is with the consulting firm Price Waterhouse Coopers. He's done some work for the big airlines, but after crunching the numbers, he found, adjusted for inflation, domestic airfares actually fell about 1 percent a year since the beginning of the merger era, though that doesn't include fees. Yes, there's less competition in some places, but Kletzel says airline mergers are different.
KLETZEL: This is not like two fast-food chains merging, where you might have, you know, very overlapping sales regions.
BOBKOFF: American and U.S. Airways say they currently overlap on only 12 out of 900 routes. So for the most part, they complement each other. Though while few expect any big jump in prices after the merger, there are a few ways fares could rise. Flights for the two carriers directly compete today. It could get more expensive. Flyers in smaller cities might have fewer options for connecting flights, and then there are the fare wars.
Rick Seaney of FareCompare.com says that's when one airline sneaks in a sale, and the others have to decide whether to match it.
RICK SEANEY: There's one less airline to fire out an airfare sale.
BOBKOFF: It works the other way, too. When one airline tries to hike prices, some of the competitors might match it. But often, one refuses, and the others end up backing down. With just four airlines, there's less of a chance of a renegade. These sales are George Hobica's bread and butter. He runs AirfareWatchdog.com, looking for things like an $88 unadvertised roundtrip fare that's gone before you know it.
GEORGE HOBICA: We really built the business on these wacky, irrational fare sales that the airlines were hitting themselves over the head with all these years.
BOBKOFF: And while he thinks fewer airlines means fewer crazy sales, he's surprisingly an optimist about this merger.
HOBICA: I actually think that service is going to improve. I mean, everyone complains about airline service. Well, the reason is because the airlines were losing billions of dollars and their employees lost their pensions. So of course they were grumpy.
BOBKOFF: He's hoping that having profitable mega-carriers might do something about dirty planes and surly service. And there are other benefits for consumers, Hobica says. If your American flight is cancelled, the new airline will have far more options for rerouting. Though, one caveat here: Even though American says it will keep all of the two airlines' hubs, Hobica says airlines don't always keep their promises.
HOBICA: When Delta merged with Northwest, they said they were going to keep all the hubs. Well, Cincinnati is a shadow of its former self.
BOBKOFF: Okay. So what about frequent flyer miles?
BRIAN KELLY: Miles are safe.
BOBKOFF: Brian Kelly runs a website called The Points Guy, which tracks all things miles and points. Eventually, he says, all American and U.S. Airways miles will be poured into one big pot. That's good if the combined total gives you enough for a free flight, but Kelly says we might lose some good deals.
KELLY: January, I used 110,000 U.S. Airways miles and flew to South Africa. That same exact trip using American miles would be 150,000.
BOBKOFF: And none of these changes will be immediate. It will take months before the deal gets its expected approval, and longer to start operating as one airline. That's when we get to find out if this last big merger is ultimately good for flyers. Dan Bobkoff, NPR News, New York.