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March 19, 2013

Senators ask American, US Airways CEOs about service, fares and fees

American Airlines and US Airways chief executives reiterated their proposed merger would be good for consumers as U.S. Senators asked about service cuts, possible fare increases and additional fees for travelers at a hearing on Tuesday.

"We will provide better service, more efficient service to consumers," said US Airways chief executive Doug Parker, who will lead the newly combined carrier.

Senators questioned the executives about service in Iowa, upstate New York and the Washington D.C. region, where US Airways currently controls over half of the slots at Reagan National Airport. Parker said he doesn't think the airline should divest any slots, however, would do so if required by the Justice Department in order for the merger to be approved.

The executives said the combined $1 billion in merger cost savings are from efficiencies and not from raising fares and adding additional fees for travelers.

"We think the unbundling of fares has actually been constructive and good for customers it allows for them to pay for what they want," American chief executive Tom Horton said in response to Sen. Klobuchar's question about transparency around fees for baggage, seat assignments and reservation changes.

Other witnesses at the hearing voiced concerns that the merger will result in less competition and higher airfares.

American Antitrust Institute director Diana Moss said low cost carriers and regional carriers will have difficulty thriving when four airlines - United Continental, Delta, Southwest and a combined American-US Airways - hold over 80 percent of the industry market share.

Although there are only 12 routes that overlap in the two carriers' networks, Moss said the combination could "raise fares and restrict service."

The merged American-US Airways will create the largest airline in the U.S. and some communities may lose air service because of lack of competition, said William McGee, a consultant with the Consumers Union.

"We’re concerned that as the major airlines become bigger and fewer they will become too big to fail," McGee told the Senate subcommittee.

-Andrea Ahles


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