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Senators ask if American-US Airways merger cuts flights

Bart Jansen
American Airlines CEO Tom Horton, right, and US Airways CEO Doug Parker testify before a Senate Judiciary subcommittee on March 19, 2013.
  • Consumer advocates argue the merger could cut flights to small cities and raise fares
  • JetBlue wants any newly merged American to give up slots at Reagan National airport
  • Justice Department must sign off before the two carriers can proceed with merging

WASHINGTON — Senators sought commitments Tuesday from chief executives of American Airlines and US Airways that flights to New York, Connecticut, Iowa and Arizona wouldn't be cut under the proposed merger of the two carriers.

Despite skeptical questions about how fares might rise or routes might be eliminated, no member of a Senate Judiciary subcommittee reviewing the merger voiced opposition to it.

"Safe, reliable and affordable air travel is essential to communities large and small," said Sen. Amy Klobuchar, D-Minn. and subcommittee chairman. "We need to know that fewer airlines won't mean fewer flights and diminished services for the airports that are not the major hubs.

She and the panel's top Republican, Sen. Mike Lee of Utah, asked the Government Accountability Office for a report on the effects of airline consolidation on ticket prices and service.

Doug Parker, CEO of US Airways, and Tom Horton, CEO of American, said the merger would boost competition by strengthening the merged company to be a better rival to Delta and United.

"This merger will create more choice for customers, more ability to fly to more places," Horton said. "It'll connect more dots on the map."

Parker, who will run the combined airline if the merger is approved, said it would take a year and a half for the companies to merge. But he said travelers would find it easier to connect from locations such as Dubuque, Iowa, and Yuma, Ariz., or Rochester, Minn., and Hilton Head, S.C., which aren't now served by the same airline.

"We can compete better together," Parker said.

The Justice Department must review the merger, but the department has approved mergers involving Delta and Northwest in 2008, United and Continental in 2010 and Southwest and AirTran in 2011.

American and US Airways have 17 non-stop routes between the same cities that overlap. The new airline would offer 6,700 flights daily to 336 destinations in 56 countries.

Consumer advocates warned that consolidating to funnel passengers into larger hubs and onto more lucrative international flights could reduce flights and raise fares for small- and midsize airports.

William McGee, a consultant for Consumers Union, said analysts are speculating about the fate of US Airways hubs in Philadelphia, Charlotte and Phoenix after cities such as St. Louis, Las Vegas, Cincinnati and Cleveland lost service in previous mergers.

"The stakes couldn't be higher for airline passengers facing fewer and fewer choices in a market that has become ever more concentrated," McGee said.

Diana Moss, director of the American Antitrust Institute, said low-cost carriers such as JetBlue serve less than 10% of the national market and might not be able to keep prices down at the larger carriers.

"I don't think we can rely on them to save us all from higher prices," Moss said.

The competitive market at Reagan Washington National airport drew particular attention because the combined airline would control two-thirds of the slots there.

US Airways already controls 55% of Reagan's slots, after a 2011 swap with Delta for slots at New York's LaGuardia.

JetBlue competes with US Airways on 34 of its 36 slots at Reagan, according to Robert Land, JetBlue's senior vice president for governmental affairs. JetBlue urged lawmakers to press the Justice Department to force the merged airline to give up slots at Reagan.

"JetBlue believes that the merger, absent meaningful action by the Department of Justice, will make an unbalanced competitive situation at Ronald Reagan Washington National Airport even worse," Land said in written testimony to the hearing.

Asked about the slots, Parker said there are no plans to divest the slots. He argued that if the merged airline gave up the slots, smaller communities would lose flights because whoever took over the slots would stop serving less-economical locations.

"We don't believe it would be good for consumers to divest any slots," Parker said. "It would be bad for consumers."

Parker said the slots that were auctioned off after the JetBlue swap now serve Tampa, Orlando and San Juan, which he said are large communities.

Horton said the heavy presence at Reagan ignores other airports — Dulles and Baltimore-Washington — serve the area.

"We think it's a robust and competitive marketplace," Horton said.

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