Sense prevails

THAT America’s department of justice has dropped its opposition to the merger of American Airlines and US Airways will come as a profound relief not just for the two carriers, but to an industry craving stability after years of turbulence. For nearly two decades airlines in America have been racking up big losses, going bust or briefly making profits that then brought accusations of gouging consumers on busy routes. Meanwhile powerful low-cost carriers led by Southwest Airlines have been transforming the industry and eroding the competitive position of the established carriers. Although the start-ups operate only simple point-to-point services, the sheer proliferation of such flights provides a shadow network that challenges the expensive (if convenient, for the traveller) hub-and-spoke services pioneered by American Airlines 35 years ago.

The DoJ’s opposition to a merger that would have sealed a process of painful consolidation came as a thunderbolt in mid-August. After all, hostility to proposed mergers such as United Airlines and US Airways in 2001 and Delta Air Lines and US Airways in 2006 had given way in recent years to approval of big marriages, including between United and Continental airlines, Delta and Northwest and US Airways and American West. American desperately needed to bolt on US Airways to aid its recovery from bankruptcy. This was the last piece of the jig-saw to be put in place to end the chronic instability of America’s aviation industry.

The DoJ had opposed the $11 billion merger to create the biggest airline in the world, claiming it would limit competition. In fact, the federal government was reacting to various objections by local politicians. There is nothing that upsets members of Congress more than the cost of flights to Washington going up. These concerns have now been satisfied, as some had come to expect in recent weeks, with the two carriers giving up 57 slots each at Ronald Reagan airport in Washington, which can now be taken up by low-cost carriers. Further slots will be yielded at La Guardia in New York and a handful each in other airports, such as Boston and Chicago O’Hare.

Although the agreement is still to be confirmed by a judge, Tom Horton, the boss of American Airlines, says the final steps can now be taken to have the airline emerge from two years of court protection. Not least among those sighing with relief will be Boeing and Airbus: AA has signed orders with both for hundreds of single-aisle 737 and A320 planes, and these can now go ahead.

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