Will Airline Mergers Mean Fare Increases?

Posted Sep 28th 2010 11:23 AMUpdated Sep 28th 2010 11:44 AM

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With low-fare kingpin Southwest Airlines announcing it will acquire rival AirTran and the United-Continental merger expected to be finalized this week, airline analysts and other industry observers are busy fielding questions on how consumers will be impacted.

Some are predicting as the airline industry consolidates, higher fares will be the result.

"Whatever airlines claim about efficiencies of consolidation, their real goal is to increase pricing power," Tim Winship, publisher of FrequentFlier.com, tells MSNBC. "That's what consolidation is about at the end of the day."

But George Hobica, president of Airfarewatchdog.com, predicts any increases from the mergers will be minor.

"If fares go up too much, people will stay home or drive, and a new discount airline like JetBlue will launch," Hobica tells USA Today.

With the Southwest-AirTran deal, fares may rise in certain cities such as Baltimore, Orlando and Milwaukee where the two low-cost carriers currently compete, Rick Seaney, president of FareCompare.com, tells the newspaper.

At the same time fares may go lower in Atlanta, a market that's been dominated by Delta, and which Southwest enters as a "formidable competitor" as part of the AirTran acquisition, says Frank Warner, an associate professor of finance at Fordham University.

With the Southwest-AirTran merger, travelers will save in one area for sure. Southwest says it will drop the $20 to $25 checked baggage fees AirTran charges when the carriers combine in 2012. Southwest does not charge for checked bags.

But airline analyst Joy Sorenson tells MSNBC that even combined Southwest and AirTran do not have a large enough market influence to convince bigger carriers like United and American to follow suit and drop their checked baggage fees.



Photo, randomduck, flickr
Filed Under: News

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LDmerriam

Rising fares are just the tip of the iceberg when it comes to misery for travelers when airlines merge: http://bit.ly/9Dwnxv

October 15 2010 at 5:00 PM Report abuse rate up rate down Reply

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