Approve this merger
On the day that Frontier Airlines announced its intent to merge with its fellow discount air carrier Spirit Airlines, the acquiring carrier suffered an ill-timed IT problem that briefly grounded its jets. So last week presented a golden opportunity to the many bloggers who obsess about the airline industry and its complex web of points and incentives.
But for many people, an affordable ticket can mean the difference between taking a trip and not having the money to do so. And experience shows that when an ultralow-cost carrier is in the market, not only does it offer cheap fares, but average fares on all airlines tend to drop. You only need compare fares with the dominant O’Hare International Airport carriers American and United airlines when Spirit or Frontier competes here. The competition is good for Chicago consumers.
Few observers of the airline industry would argue that all mergers of the last 15 years have been good for travelers. Delta’s merger with Northwest, United’s with Continental and American’s with US Airways all resulted in reduced choices for consumers, hurting cities like Pittsburgh (which mostly lost its hub status) and stranding some communities altogether.
None of those mergers got the level of federal scrutiny they deserved, at least in retrospect. One or two of them probably should not have been allowed at all.
On that same note, we think the Justice Department was right to sue this fall to block the so-called Northeast Alliance between American and JetBlue, which the feds said would “harm air travelers across the country by significantly diminishing JetBlue’s incentive to compete with American elsewhere, further consolidating an already highly concentrated industry.” Exactly right, even if American claimed benefits for its passengers.
But the Frontier-Spirit case is different. The gap between the top four airlines (which, with their commuter affiliates, control some 80 percent of domestic air travel) and No. 5 is huge. Moreover, those four leaders always try to avoid competing on price.
By turning the so-called Big Four into the Big Five, competition will actually grow.
We think the Justice Department should always pay attention to this industry where consolidating seems to be what CEOs think about the moment their eyes open on their pillows. And we’re all in favor of boosting travelers’ rights when things go wrong. Europeans have far better protections.
But business travel is facing a long road back. Leisure travel already is roaring. Allowing this merger, perhaps with a few caveats that could boost either JetBlue or Allegiant (a small player at Midway) will be beneficial for travelers across the nation. It’s good to keep the big dogs on their toes.