Washington, DC — William McGee, travel and aviation expert for Consumers Union, the nonprofit publisher of Consumer Reports magazine, will testify before the House Transportation and Infrastructure Subcommittee on Aviation on the proposed United/Continental Airlines merger on Wednesday, June 16th, 2010.  McGee testified on the same topic last month before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights.
 
In his prepared testimony, McGee will illustrate how previous airline mergers hurt communities and consumers, and he will suggest how the United/Continental airlines merger may negatively impact services, price and choice for millions of air traveling consumers:
 
“Historically we have not seen a merger among major carriers that has not led to reductions in service and usually a dramatic reduction of flights at one or more hubs. In fact, among the arguments for airline mergers are reducing redundancies and achieving "economy-of-scale" benefits,” McGee will testify.
 
“A total of 12 cities recently lost nonstop service to St. Louis in the wake of the American-TWA merger, and a total of 10 cities have lost nonstop service to Las Vegas since the US Airways-America West merger. The more mega-mergers that are approved, the higher the probability that additional cities will lose service.”
 
“Without this new generation of low cost carriers, legacy airlines undoubtedly would be charging more on routes populated by these low-fare airlines, particularly in vacation markets such as Florida,” McGee will testify.
 
“What we've seen with recent mega-mergers is the new airline does not perform as well as one or both of its partners performed pre-merger. American's on-time performance fell in the years after it acquired TWA, which had been an on-time leader. And US Airways currently ranks lower in on-time flights than it did when it operated as America West; similarly, it generates more consumer complaints today as well,” McGee will testify.
 
“Simply put, the more market share that is dominated by mega-mergers, and the smaller the pool of major carriers becomes, the harder it will be for new airlines—particularly Low Cost Carriers—to compete. And there's no question this will hurt consumers.”
 
“One major carrier will initiate an airfare increase and then the industry watches to see if others will match; if enough key players are strong enough to resist such an increase, then the initial fare hike will be withdrawn.”
 
“With greater concentration of market share among just a handful of mega-carriers, the United States faces a much greater threat of travel disruptions. Imagine the nationwide effects of a labor slowdown or strike at a combined United-Continental, which analysts estimate would control nearly a fifth of all domestic airline seats.”
 
“Five major U.S. carriers filed for Chapter 11 bankruptcy reorganization at least once during the last decade,” said McGee.  “The overnight shutdown of such a large percentage of the nation's commercial airlift would have immediate and adverse effects on America's economy, infrastructure, and even security. Therefore the wise move is to prevent the further concentration of the nation's airline industry—before it's too late.”
 
“Delta's recent merger with Northwest made it the number one carrier, only to be eclipsed by United-Continental, which in turn would be eclipsed by American-US Airways. And this sudden leapfrogging in the ranks has not been due to genuine growth—to expanding service into new cities, hiring more employees, ordering more aircraft—but to legal exercises, which have led to reductions in service, laying off more employees, and parking more aircraft.”
 
McGee’s testimony will conclude with a question for the members of the House subcommittee: “Today we're being told the domestic airline industry can only support three large network airlines; how long before we're told that number has been reduced to one large network airline?”