American Airlines Now No. 3

Experts say consolidation likely to mean higher fares in long run

By Ken Kalthoff
|  Friday, Oct 1, 2010  |  Updated 11:27 PM CDT
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With the merger between United and Continental complete, <a title=Fort Worth's hometown airline is now the nation's third largest air carrier." />

Ken Kalthoff, NBCDFW.com

With the merger between United and Continental complete, Fort Worth's hometown airline is now the nation's third largest air carrier.

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With the merger between United and Continental complete, Fort Worth's hometown airline is now the nation's third largest air carrier.

Delta's merger With Northwest had briefly lifted the Atlanta-based airline to No. 1, knocking American Airlines out of the top spot. And Dallas-based Southwest Airlines will remain in the No. 4 position, even after its recently announced deal with AirTran closes.

Experts say all the consolidation is likely to mean higher fares for passengers in the long run.

"The airlines can't make money if they are constantly fighting price wars, and so this consolidation is one way to eliminate some degree of price competition," said Mike Davis, a professor at Southern Methodist University's Cox School of Business.

Margery Hunter, of Rudi Steele Travel in Highland Park Village, said many customers complain today about airline service. Hunter, who has been a travel agent for 28 years, said she believes consolidation may reduce service in some places.

"A general lowering of competition is going to increase fares, reduce service and increase frustration," she said.

"The airlines couldn't keep giving away their service," Davis said. "Consumers would have to expect higher fares. That's just the way it is."

American remains the dominant airline in North Texas, with the most flights from Dallas/Fort Worth International Airport. The consolidation of other carriers won't change that for now.

But the two experts say the Southwest merger could add new destinations for North Texas travelers out of Dallas Love Field.

"We in Dallas are really going to benefit from that," Davis said.

Southwest plans to eliminate baggage fees as it takes over the AirTran service, which may also be a savings for travelers.

"The AirTran-Southwest merger will be a different animal all together," Hunter said.

Davis said consolidation could lead to a healthier airline industry for the long-term survival of the resulting companies.

"Bigger networks are good airlines," Davis said. "If you can go more places on airlines, if your frequent flier miles work for more places that you might want to go, that makes that airline that much more desirable."

Davis said American Airlines already has a strong domestic network and can probably effectively compete without additional consolidation. But the airline would benefit from additional international service, which it has been working to achieve, he said.

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