CHARLOTTE, N.C. ( TheStreet) -- A new report by advocacy groups said a potential merger between US Airways (LCC) and American (AAMRQ.PK) could substantially reduce airline competition, but US Airways President Scott Kirby called a merger "pro-consumer."
US Airways, the fifth-largest U.S. airline, wants to merge with bankrupt American, the fourth largest, producing the largest carrier with an approximate market share around 20%. For its part, American said it wants to reorganize as a standalone carrier during its bankruptcy, then determine whether a merger makes sense.
The report, released by the American Antitrust Institute and the Business Travel Coalition, said a merger would pose problems but stopped short of recommending that Department of Justice antitrust regulators reject it. US Airways has had preliminary conversations about a merger with officials from the Justice Department's antitrust division.
Kirby said in an interview that a merger would be pro-consumer because "it would create an airline that can compete with United (LCC) and Delta (LCC) which neither US Airways nor American can do. Today, you have two (U.S.) airlines that serve the frequent flier who travels globally: This merger would create a third competitor."Told that the report identifies a half dozen markets where no competitors would remain after a merger, Kirby responded, "Six is a pretty small number. "Look at a route map," he said. "We have very complimentary and non-overlapping routes out of the hundreds of markets we serve." A half dozen markets would lose non-stop competition, the report said. The markets are Charlotte/Dallas; Charlotte/Miami; Philadelphia/Dallas; Philadelphia/Miami; Washington National/Nashville and Phoenix/Dallas. (Since the report was prepared, Spirit (SAVE - Get Report) has said it will fly Phoenix/Dallas starting in 2013.) The report raised several other questions about a potential merger. Among them: -- It challenged the long-standing assumption that low-fare carriers would provide sufficient fare competition to the legacy carriers. "This consolidation would occur against an industry backdrop marked by a dwindling fringe of low-cost carriers and growing questions as to whether legacy look-alike Southwest (LUV - Get Report) exerts any significant competitive discipline in the industry," the report said.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts