US’ Department of Justice (DOJ) and the US Government Accountability Office (GAO) released (19-Jun-2013) a review of the proposed merger between American Airlines and US Airways and the affect this may have on competition within the industry. DOJ used an integrated analytical framework as described in the Horizontal Merger Guidelines which found the proposed merger would likely have an anticompetitive effect in relevant markets. The report read, “GAO has previously reported that mergers can result in increased revenues by offering improved network connections and schedules, but also through higher fares on some routes. Cost savings can be generated by eliminating redundancies and operational efficiencies, including reducing service, but can be muted by problems in combining different aircraft, technologies, and labour forces. In the case of US Airways and American, they estimate that a merger would yield $1.4 billion in annual benefits from increased revenues and reduced costs.” [more - original PR]
Department of Justice finds US/AA merger would reduce competition
You may also be interested in the following articles...
US-China open skies: a window in 2019 – alignment of airline partnerships & airport infrastructure
The year 2019 presents a possible opening for China and the United States to sign an open skies agreement. This would principally lift restrictions on flights between the countries – important, since both nations have saturated primary traffic rights and there have been unsuccessful negotiations to expand the allotment.
Most importantly, open skies is a prerequisite for US approval of US-China airlines' joint ventures with antitrust immunity. These partnerships permit airlines to coordinate networks and pricing jointly – which, they say, increases consumer choice, but which other groups worry reduces competition, after experience in the trans-Atlantic market.
Perhaps paradoxically, the lure of a JV will mean that the airlines lobby their governments for open skies that might eventually reduce competition. US airlines will want greater slot availability at Shanghai and Beijing, which could occur in 2019.
Finally, airlines will need to have confidence in a shared future with their partner. China Eastern is close to Delta, while China Southern has a young partnership with American Airlines. Air China, however, does not feel close to United Airlines, which has the highest presence of its own metal in the market. Air China questions whether United actually wants open skies. There is unlikely to be any government deal without the support of Air China, the flag carrier, and a major airline that enjoys a close relationship with the regulator.
American Airlines and Norwegian forge new partnerships for global reach: CAPA Americas Summit
American Airlines' recent pursuit of China Southern, and Norwegian’s partnership discussions with Ryanair, reflect the multiple changing dynamics that airlines operating across all business models must face as they maximise network connectivity to remain relevant and competitive. American had to drift outside oneworld to gain an important foothold in China, while Norwegian stresses that traditional airline partnership structures are not viable for its business model.
But despite American’s attention grabbing decision to take a small equity stake in China Southern, the agreement appears to be a one off event. American has no plans to join rival Delta in pursuing stakes in airlines around the world to attain network longevity. American's position is that its current and prospective joint venture agreements provide anchors in the most important global regions.
For Norwegian, a potential tie up with other low cost airlines allows the company to offer network breadth to the pool of passengers it intends to stimulate with new narrowbody service to the US, but without the frills and expense inherent in more complex airline partnerships.