Shifts in the Airline Industry

It seems as if American Airlines and US Airways will finally be able to merge together to become the largest airline company in the world. The U.S. Justice Department was initially adamant about not allowing such a deal to occur due to fears about monopoly power.  Critics feared that such a large airline would be able to charge much higher prices and not charter flights to as many smaller cities. The deal was able to gain traction once the two airlines agreed to reduce their gate amounts at major airport hubs across the country. The idea behind this is to allow smaller airlines to use these open gates and thus reduce the power of the new merged company. Ideally, this would allow rates to stay constant and airline traffic to continue towards smaller cities.

            Upon this breaking news, American Airlines stock rose 26% while US Airways stock rose 1.1%. The new merged company will hold the name American Airlines and the new top executive would be US Airways previous chief executive. Airlines have incredibly high fixed capital costs, so the rationale behind this move is to allow the companies to save over $1 billion dollars. This new huge company would carry close to 1 million employees and annually fly close to 140 million customers throughout the world. However, many individuals are upset that the merger is allowed to happen claiming that this will essentially create an oligopoly in the airline industry. Only time will tell how the airline industry will shape out, but for the time being it seems as if this merger is becoming a reality.

-Dylan Margolin