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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

April 23, 2012 at 10:00 AM

Another anti-competitive airline merger

USAirways wants to acquire American Airlines as it emerges from Chapter 11 bankruptcy protection. This is yet another anti-competitive, job-killing airline merger that will fail to fulfill its promises, no matter how much the top executives make. The Obama administration needs to stop it.

The old USAir was a product of many mergers. It had a reputation for acquiring well-run airlines, especially Piedmont and Pacific Southwest, and promptly ruining them — but not before destroying thousands of jobs and closing hubs, such as the efficient Piedmont hub in Dayton, Ohio. Not for nothing was the joke that USAir stood for “Unfortunately, Still Allegheny In Reality,” harkening to its original, troubled roots. America West Airlines merged with USAirways in 2005 and CEO Doug Parker has been more interested in selling off the airline than actually serving customers ever since.

American, led for clueless years by Bob “Lumpy” Crandall, plans to slash at least 14,200 jobs and abrogate union contracts — the joys of Chapter 11. It may want to emerge as a stand-alone carrier. USAirways has been wooing the unions, promising a better deal. A merger won’t be a better deal for customers or, ultimately, the remaining workers.

If USAirways succeeds, it will mean one less competitor, one less choice, in an already highly consolidated industry. United and Continental merged, as did Delta and Northwest. TWA is long gone, acquired by American (gee, that worked out well). Along the way are devastated communities that lost hubs, jobs and service. The bad guys are always the unionized workers of these “legacy carriers,” never the CEOs who looted the treasury for compensation or ran the companies into the ground when faced with nimble competition from Southwest.

The one thing consolidation has proved is that mergers don’t succeed, beyond providing a few golden parachutes. If American can’t stand alone, let it be liquidated. And in an industry heavily subsidized by taxpayers, let the federal government be more focused on reducing barriers to entry by new competition and ensuring existing competition. Sorry, Doug. Not this time. Off to the golf course with ye.

And Don’t Miss: Manufacturing — the third Industrial Revolution || The Economist

Today’s Econ Haiku:

Wal-Mart, Mexico

Those everyday low prices

Come with mordida

Comments | More in Airlines

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