Congress of the United States

December 20, 2000

 

 

Rep. James L. Oberstar

(Minnesota)

Ranking Democratic Member

Committee on Transportation

And Infrastructure

 

Rep. Louise M. Slaughter

(New York)

Member

Committee on Rules

 

 

 

Oberstar, Slaughter to Release GAO Study United-US Airways Merger

Analysis shows merger would reduce competition in 290 markets and spur further airline consolidation.

 

WASHINGTON—The proposed merger between United Airlines and US Airways will reduce airline choices for millions of air travelers and is likely to push other carriers to consolidate in order to compete with the merged airline, a new study by the General Accounting Office shows.

 

Rep. James L. Oberstar (D-Minn.) and Rep. Louise M. Slaughter (D-N.Y.) are to release the GAO report, "Aviation Competition: Issues Related to the Proposed United Airlines-US Airways Merger"(GAO-01-212), today at a Capitol Hill news conference.  Oberstar is the Ranking Democratic Member of the House Transportation and Infrastructure Committee.  Slaughter, represents Rochester, N.Y., a market that already has some of the highest airfares in the country.  Rochester stands to be heavily affected by the merger.

 

“I have been deeply concerned about the anti-competitive effects of the proposed merger of United Airlines and US Airways, and the accompanying proposed transfer of slots to a new airline, DC Air,” Oberstar said. “I believe that, if the proposed merger were to be approved, the remaining large airlines would feel compelled to merge to retain their shares of the overall market.  We would soon be reduced to an industry of three major competitors, resulting in a devastating loss of competition for consumers.”

 

“This report underscores what I have said all along–that this proposed merger would be the beginning of the end of the aviation industry as we know it,” said Congresswoman Slaughter. “If the merger goes forward, other mergers would follow.  Communities would be at the mercy of three carriers, dominating the entire United States.  Deregulation was never intended to facilitate the creation of de facto monopolies controlling which communities live or die depending on their access to air service.”

 

Among the study’s findings:

 

·        After a merger, the New United would dominate 1,156 of the 5,000 most heavily traveled markets, affecting 61.1 million passengers.  New United’s market dominance would be 36 percent larger than that of the next carrier, Delta Airlines.

·        The merged airline would carry 33 percent more passengers than Delta; 89 percent more than American; and 89 percent more than Southwest, and New United would carry nearly the same number of passengers as Northwest, Continental, TWA and America West combined. 

·        Based on interviews with industry analysts and officials from several airlines, GAO concluded that if the merger were approved, the “new United would so alter the existing balance in the domestic market that, for the other major U.S. airlines to compete successfully, they would have little choice but to consolidate as well.”

·        The merger of United and US Airways would reduce or eliminate competition for almost 16 million passengers in 290 of the most heavily traveled aviation markets.  In 43 of those 290 markets, the merger would reduce the number of competitors from 2 to 1, affecting 4.1 million passengers.

·         GAO compared the proposed United-US Airways merger to the proposed alliance and stock acquisition between Northwest and Continental, which DOJ found to violate anti-trust laws.  GAO’s findings indicate that the loss of competition from a United-US Airways merger would be much greater than from a Northwest-Continental relationship.

 

“Fewer choices, higher fares and a deterioration in service is not what Congress contemplated in 1978 when it deregulated the airline industry.  Yet, that is the likely result if a United-US Airways merger is approved by the Department of Justice,” Oberstar said.  “I strongly urge the DOJ to take heed of the GAO’s analysis of the merger’s impact on competition and consumers, and reject this proposed merger.”

 

Reps. Oberstar and Slaughter will release the GAO report at a news conference Wednesday, December 20, at 11:00 a.m. in room 2167 of the Rayburn House Office Building.  Hard copies of the report will be available at the event.

 

 The report, GAO-01-212, will also be available on line at www.gao.gov .

 

 

Contacts:     Jim Berard (Oberstar) 202-225-6260

                     Becky Bailey (Slaughter) 202-225-8415

 

 

END