Bloomberg News

JetBlue Says AMR Should Cut Washington Flights After Deal

March 19, 2013

AMR, US Airways Leaders Defend Merger Called Bad for Fliers

Combining AMR Corp.’s American Airlines and US Airways Group Inc. would leave three major U.S. carriers with domestic and international routes, down from seven in 2000. Photographer: Andrew Harrer/Bloomberg

AMR Corp. (AAMRQ:US)’s American Airlines and US Airways Group Inc. should give up flights at Washington’s Reagan National Airport before U.S. regulators approve the carriers’ merger, a JetBlue Airways Corp. (JBLU:US) executive said.

The merged airline would control about two-thirds of flights at the capacity-controlled airport, which would allow it to restrict growth by smaller carriers and raise fares, Robert Land, JetBlue’s senior vice president for government affairs, said in a letter to U.S. Senator Charles Schumer.

“A significant number of slots at DCA must be divested by the new American as a condition of any merger in order to inject much needed competition, limit further concentration and benefit the traveling public,” Land wrote, referring to Reagan National by its airport code. Schumer, a New York Democrat, released the letter today.

The deal to create the world’s largest carrier was defended today by the companies’ chief executive officers, Doug Parker of US Airways and Tom Horton of AMR, before the antitrust subcommittee of the Senate Judiciary Committee.

There’s no need for the U.S. government to take away Reagan National slots from the new airline because the region is served by two other large airports with robust competition, Horton said. Those airports are Washington Dulles International and Baltimore/Washington International Thurgood Marshall.

Taking slots at Reagan National from the combined carrier would hurt service to smaller communities, Parker said. US Airways serves many such communities with regional aircraft out of the airport, he said.

Reagan Slots

Long Island City, New York-based JetBlue bought rights to 16 flights in and out of Reagan National in 2011 and began service last year, competing with US Airways and American.

Low-cost carriers such as JetBlue, Southwest Airlines Co. (LUV:US) and Alaska Air Group Inc. (ALK:US) will continue to provide competition that will help keep fares down, Parker and Horton said.

A merger of American and US Airways would leave three major U.S. carriers with domestic and international routes, down from seven in 2000. Announced on Feb. 14, the merger is scheduled to be completed as AMR exits bankruptcy protection in this year’s third quarter.

The combination must win approval from AMR’s bankruptcy judge, shareholders of Tempe, Arizona-based US Airways and U.S. regulators. The Justice Department’s antitrust division earlier this month asked for more information from the companies.

The merged airline would keep American’s name and its Fort Worth, Texas, headquarters, and retain the two carriers’ seven hubs.

Consumer Concerns

A merger of the two companies would increase fares, reduce service to smaller communities and make it more difficult for low-cost carriers to compete, two consumer advocates said at the hearing.

“The proposed deal raises significant competitive issues that could result in harm to consumers,” Diana Moss, vice president of the American Antitrust Institute, said. The institute is a Washington non-profit group that promotes consumer rights.

William McGee, a consultant to Consumers Union, a Yonkers, New York-based arm of the non-profit product testing organization Consumer Reports, said previous mergers have hurt airline passengers.

“We are concerned that the proposed merger between American Airlines and US Airways has the potential to further deprive air travelers of healthy, robust competition, and to further deprive communities of being part of a vibrant air transportation network,” McGee said.

Maintaining Flights

When Southwest is included, the merger would “result in four top airlines controlling nearly 80 percent” of domestic air traffic, said Senator Amy Klobuchar, chairman of the antitrust subcommittee.

The panel must review concentration in the industry and what it means for rural areas, baggage fees and other airline charges, said Klobuchar, a Minnesota Democrat.

“With fewer competing airlines can we expect even more of these charges?” she said. “We need to know now that fewer airlines won’t mean fewer flights and fewer services,” she said.

Some senators asked the executives to ensure they would maintain current service to their home states.

“The consolidation should only be cleared for takeoff if we can be sure it would not mean higher fares or poorer service or reduction in New York jobs,” Schumer said.

“We have no intention of reducing service,” Parker said in response.

Iowa Republican Chuck Grassley said his constituents are concerned about keeping flights to their state and urged the merger be examined for potential harms to service there.

Horton said American has been proud to serve “Iowa for decades” and would continue to do so.

To contact the reporter on this story: Alan Levin in Washington at alevin24@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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  • JBLU
    (JetBlue Airways Corp)
    • $11.48 USD
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