“The airline case shouldn’t be taken in isolation of other deregulated industries,” says Mr. Winston. “What we’re seeing in airlines is what we’ve seen in railroads, telecom, and trucking.”
As it has in other markets, consolidation has steadied an airline industry dogged for decades by the effects of deregulation, rising fuel costs, labor problems, and the advent of low-cost competitors. In fact, after a period of bankruptcies and liquidation, the industry is profitable again, with 2013 profits projected at $6.8 billion, according to analyst estimates reported in the Wall Street Journal.
Of course, that consolidation – the final chapter of which is the American-US Air merger – comes at a cost to consumers.
Consumers can expect to see modestly higher fares as a result of the merger, especially in smaller markets where competition is less intense, says Seth Kaplan, an analyst with Airline Weekly magazine. Mr. Kaplan predicts fare increases in the “single digit percentages,” along with fewer choices for consumers.
The merger “ultimately ends up taking a little supply out of the market,” he says. “Having fewer players competing does result in … modestly higher airfares, but it’s still a very competitive industry.”
Consumer complaints also spike immediately following a merger, with two airlines struggling to merge their reservations, luggage, and frequent flyer programs. As such, experts warn consumers to be prepared for more lost luggage, reservation problems, and frequent flyer hiccups, in the near future.
But it’s not all storms and squalls – analysts see a silver lining in the new union.
For one, the merger, and the larger trend of consolidation it represents, brings stability to the industry and to consumers.