Airline Competition: Issues Raised by Consolidation Proposals

In May 2000, United Airlines proposed acquiring US Airways and divesting part of those assets to create a new airline to be called DC Air. More recently, American Airlines has proposed buying 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. Congress, the Department of Justice, and the Department of Transportation need to answer several questions in evaluating the proposed mergers. For example, questions remain about whether American's purchase of financially-strapped TWA represents the last anticompetitive means to preserve its assets. The proposals by American, TWA, United, US Airways, and DC Air constitute the most significant recent changes that have occurred in the airline industry, and the outcome of these decisions could have both positive and negative effects for consumers for years to come. This testimony summarizes a December report (GAO-01-212).