Executives of American Airlines (NASDAQOTH:AAMRQ) and US Airways (NYSE:LCC) told lawmakers Tuesday that combining their companies will benefit consumers by creating a tougher competitor for industry giants United (NYSE:UAL) and Delta (NYSE:DAL).
Although an American-US Airways merger would create the world's largest airline, the new American would still have less than 25 percent of the U.S. market, the executives said. Asked directly whether prices would go up with fewer airlines left, the executives said they didn't know.
The executives made the comments at a hearing of a House antitrust law subcommittee. American, owned by AMR Corp., and US Airways Group announced on Feb. 14 that they planned to merge in a deal valued at $11 billion in stock. The new airline would be called American but run by US Airways' CEO Doug Parker.
Two opponents of the merger -- and congressmen sympathetic to their views -- said they feared that it would lead to higher prices and less service on routes where American and US Airways now compete. They said that American was completing a successful restructuring, US Airways just reported a record profit and each would do fine on its own.
"Industry consolidation may benefit the airlines that remain, but it comes with potential costs to the consumer," said Rep. John Conyers, D-Mich.
AMR general counsel Gary Kennedy and US Airways executive vice president Stephen Johnson said the companies needed to merge to compete with United Continental Holdings and Delta Air Lines, each of which grew bigger through recent acquisitions.
"Our customers have been telling us that they want a bigger network," Johnson said. "They have been telling us indirectly by leaving American Airlines and leaving US Airways to fly on Delta and United's new, bigger networks."
Congress has no formal role in approving the merger -- that's up to antitrust regulators in the Department of Justice, the federal judge overseeing American's bankruptcy case and company shareholders. Lawmakers used the hearing to detail their positions and, in several cases, to make parochial pitches for additional service at local airports.
Rep. Keith Rothful, R-Penn., appealed for more flights to Pittsburgh, but couldn't extract any hard promises from the airline executives.
Rep. Steve Cohen, D-Tenn., said that Delta CEO Richard Anderson assured lawmakers in 2008 that the Delta-Northwest merger would lead to more service at Memphis International Airport, which is in Cohen's district. Instead, daily flights went from 240 to 96. "On Saturdays, it looks like Dodge City," he said.
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