Consumer groups wary of airline deal

Consumer groups are cautiously optimistic about a deal announced this week that gives government approval for US Airways and American Airlines to merge.

The settlement between the Department of Justice and the airlines requires them to give up 104 takeoff and landing slots at Washington’s Ronald Reagan National Airport and another 34 at New York’s LaGuardia Airport.

Additionally, the airlines will be required to maintain hub operations at airports in Dallas, Miami, Chicago, New York, Phoenix, Charlotte and Philadelphia for at least three years.

Consumer Travel Alliance Director Charlie Leocha, who encouraged the Justice Department to try to block the merger, said Thursday that he waiting to see how the terms that were reached with the airlines would affect passengers.

{mosads}”At first blush, I wasn’t too happy, but I think the Department of Justice may have found a way to make a fundamental change in the aviation marketplace,” Leocha said in an interview with The Hill. “Opening up these larger airports to low cost companies will allow the JetBlues and Southwests of the world to start serving these bigger airports in greater numbers.”

The Justice Department filed a lawsuit in August to block the proposed US Air-American merger, arguing that the potential combination would increase prices for airline passengers.

The airlines countered that they needed to be able to merge to compete with other airlines that have been allowed to combine in recent years like Delta and Northwest airlines, United and Continental and Southwest and AirTran Airways.

Leocha, who also opposed the previous airline mergers, said on Thursday he was encouraged by the Justice Department’s statement that most of the flights that are being relinquished in exchange for the merger approval would go to low-cost airlines.

“The Southwest effect, even though it’s not as strong as it used to be, is still a big deal and it’s going to make a big difference in D.C. because a lot of these routes that are now having small regional flights are going to  be getting 737s,” he said.

Leocha said Southwest’s acquisition of flight rights at Liberty International Airport after United and Continental’s merger was approved in 2009 resulted in a 36 percent increase in passenger traffic and 13 percent reduction in average flight price at the airport.

Attorney General Eric Holder predicted in his announcement of the settlement with US Air and American that the agreement could lead to a similar phenomenon taking place at National and LaGuardia airports.

“This agreement has the potential to shift the landscape of the airline industry,” Holder said in a statement. “By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports, this settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country,” Holder said.

Leocha said he thought the Justice Department’s agreement with the airlines was “definitely better than what we started out with.

However, he quickly added, “I still think it would have been better for consumers just to have this merger been denied.”