Aviation Competition:

Issues Related to the Proposed United Airlines-US Airways Merger

GAO-01-212: Published: Dec 15, 2000. Publicly Released: Dec 15, 2000.

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In May 2000, two of the nation's largest airlines, United Airlines and US Airways, proposed merging. As part of the agreement, United and US Airways also proposed divesting some of the US Airways' assets at Ronald Reagan Washington National Airport to create an airline to be known as DC Air. The Justice Department is now reviewing the proposal to determine if the merger would violate U.S. antitrust laws and, if so, whether the proposed divestiture constitutes an adequate remedy. GAO reviewed the proposed merger and found that it would create an airline so large that it would spur further industry consolidation. The new airline would have more than 25 percent of the total U.S. market and would take in almost $9 billion more than the next largest airline. Although the proposed merger may benefit consumers by boosting competition in some areas, it could also eliminate competition in other areas and reduce consumer choice. DC Air would face significant competitive challenges from other airlines. DC Air would offer smaller aircraft and less frequent service but would seek to compete with other airlines by reducing its fares.

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