Airline Competition: Issues Raised by Consolidation Proposals
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Airline Competition: Issues Raised by Consolidation Proposals

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  • English

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    • Abstract:
      In May 2000, United Airlines (United) proposed to acquire US Airways and divest part of those assets to create a new airline to be called DC Air. More recently, American Airlines (American) has proposed to purchase Trans World Airlines (TWA), along with certain assets from United. These proposals have raised questions about how such consolidation within the airline industry could affect competition in general and consumers in particular. Extensive research and the experience of millions of Americans underscore the benefits that have flowed to most consumers from the 1978 deregulation of the airline industry, including dramatic reductions in fares and expansion of service. These benefits are largely attributable to increased competition--by the entry of both new airlines into the industry and established airlines into new markets. At the same time, however, airline deregulation has not benefited everyone; some communities have suffered from relatively high airfares and a loss of service due in part to a lack of competition. GAO has been analyzing aviation competition issues since enactment of the Airline Deregulation Act. Our work over the last decade has focused on challenges to competition and industry performance, including various mergers, the Department of Transportation?s (DOT) role, concentration in select airports, key airline operating and marketing practices, barriers to entry, small community service, and fares in dominated markets. The potential shifts in industry structure that would be brought about from the proposed mergers represent a crossroads for the structure of the airline industry and the state of competition and industry performance. These proposed mergers raise numerous public policy issues that require reasoned responses. Ultimately, the Department of Justice (DOJ) has the primary responsibility to evaluate these mergers.
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