press statement
 

A Continental / United Merger Extremely Problematic

Airline industry tsunami requires high-ground regulatory analysis 

U.S. DOT and DOJ need to examine global consequences

RADNOR PA., December 12, 2006–The Business Travel Coalition (BTC) tonight responded with great concern to reports in The New York Times and The Wall Street Journal that Continental Airlines and United Airlines are in merger talks. Overwhelming competition problems resulting from merger acceleration among major network airline competitors would include (1) domestic U.S. airline industry concentration; (2) misaligned competitive structures in international aviation markets, including the exceedingly complex matter of impacts to alliance antitrust immunities; and (3) the long-term consequences of premature U.S DOT decisions including route authorities such as the pending U.S. - China route case.

In combination with the recently announced US Airways’ proposal to acquire Delta Air Lines, a potential merger between Continental and United would mandate that the DOJ and Congress shift from a one-off analysis of specific merger transactions and instead closely examine the future construct for domestic U.S. and international commercial aviation marketplaces under a rapidly accelerating industry consolidation scenario. The U.S. DOT has authority over the international route authority awards such as U.S. - China as well as decisions regarding alliance antitrust immunities. The U.S. DOJ has jurisdiction over domestic U.S. merger proposals and is in an advisory role to DOT regarding antitrust immunity for international alliances.

BTC chairman Kevin Mitchell stated, “This is the ultimate warning of the ‘tsunami’ of airline industry consolidation most feared by business travel advocates that could potentially reshape the global competitive landscape for the next several decades. The market power of resultant, reconfigured global alliances with antitrust immunity could be stunning. For example, for DOT to award a new U.S. - China route authority in the immediate term would be irresponsible given the excessive concentration that could result in that strategically important marketplace were Continental and United to merge. It is now imperative that a DOT decision on China and other cases be held in abeyance until all announcements are made, analyses completed and regulatory determinations decided.”

The Coalition believes that corporations that fund business travel activities would pay higher ticket prices as capacity would be removed as a consequence of these proposed mergers. Five major network airline competitors (US, HP, DL, CO, UA) would have been reduced to two in a relatively short period of time, should all proposals proceed. Other merger proposals would follow as sure as the sun-rises-in-the-east. What’s more, these potential transactions represent a near-term fix to the industry’s difficulties and do not address systemic profitability problems and root causes.