Today when working out at the gym, I spotted this commercial on a big screen TV overhead out of the corner of my eye. Not being able to hear it, the first thing I did when I returned home was search for the advertisement that I saw. In the end, it ended up being a commercial highlighting the newly announced American Air/US Merger. Take a look at it and let me know what you think:
My first thoughts: Interesting. Not because the commercial shed any actual light on the merger, but during the NWA/Delta Merger and the United/Continental merger I don’t recall seeing any commercials about the merge. Now I’ve never been one to watch TV, so honestly I might have just missed it. Either way, I find it interesting that they are advertising it so early into the game. Maybe this could be because the chairman of the Business Travel Coalition widened his opposition to the American-US Airways merger today and included a broad attack on IATA’s New Distribution Capability, calling it “brazen,” “shocking” and “toxic.” (you can read the entire story on ATW) or could it be because when the Representative John Conyers Jr spoke to the House Judiciary committee’s subcommittee about Regulatory Reform, commercial and antirust law, he started with:
“We come here today looking at a very important part of the economic system that has guided this country. I always worried during previous airline mergers, and without prejudging the merits of the one that brings us here today, we should recall that both parties to this merger bear a high burden in demonstrating that further consolidation in the airline industry is warranted.
“One of the arguments advanced in favor of some past mergers Delta-Northwest, United-Continental, was the claim that there was too much capacity in the industry, which led to excessively low fares that prevented carriers, particularly so-called carriers with their higher costs from earning a sufficient income. We ought to consider whether this is still the case.
“While American is still in bankruptcy, it is posed to successfully reorganize in billions of dollars in cash and reduced costs as a result of reorganization. Moreover, US Airways posted record profits. These facts suggest that both airlines are in fact perfectly capable of surviving, even thriving as standalone companies.
“Industry consolidation may benefit the airlines that remain by giving them power to raise fares and fees, but it comes with costs to the consumer. As has been noted, it may result in higher fares, fewer consumer choices particularly in hubs and city-pairs where two carriers overlapped.
“Retrospective studies of the effects of Delta-Northwest, United-Continental mergers suggest that in fact fares did rise on some routes where the two merger partners used to compete.
“Given the size of the big three legacy airlines that would remain after the merger, it’s not entirely unreasonable to suggest that they would have even greater power to tacitly agree to raise prices, undermining price competition and harming consumers in the process.
“Indeed, if American and US Airways were to merge, more than 70 percent – and by some estimates as high as 86 percent – of the domestic airline industry would be controlled by just four airlines. I fear that the flying public will see relatively few benefits while bearing much of the costs of this potential merger.
“Another related issue is whether the low-cost carriers can continue to provide effective competitive pressure on what will be the big three legacy airlines should this merger occur. One of the arguments I hear most often in the prior airline consolidations was that the industry would remain very competitive after consolidation because the competition against large carriers, which were able to offer lower fares because of their lower operating costs.
“But of the LCCs [low-cost carriers], only Southwest is large enough to compete nationwide with the large legacy carriers. There’s reason to wonder whether Southwest will continue to play the traditional role of an LCC in competing on ticket prices now that it’s part of the big airline club.
“Finally, we must consider what impact this will have on workers at the two carriers. In stark contrast to previous airline mergers, the unions representing American Airlines and US Airways, with exception of the Machinists, have come out in public support of this merger. The Machinists have said they could support it, but only after US Airways renews its contract with their own members first. Indeed, American’s unions have been instrumental in pushing for this merger.”
No matter what the reason, AA/US is pushing forward with their merger and are quickly attempting to get the general public aware of it and hopefully on the airlines side through gimmicks and sale tactics. Much of what Representative Conyers said is extremely true and worrisome. To think, US Airways is posting record profits and AA is making a full turn around in bankruptcy does negate many “needs” for a merger. Without trying to add too much of my own personal opinion and thoughts, I will leave you with this parody commercial which made me laugh when it aired last week on SNL.
Like what you read? Follow me on Twitter