This festive holiday season is starting off dismally for consumers. Delta announced its purchase of 49 percent of Virgin Atlantic Airline. US Airways made a merger offer to American Airlines (AA). And, the Department of Transportation (DOT) delayed its largest consumer protection rulemaking by four months.
There is not much good to say about any of these developments. Consumers are getting the short end of the straw in every case.
Let’s look at the mergers. I am afraid that Congress, DOT and the Department of Justice will approve the Delta buyout and their request for joint venture status with Virgin Atlantic and approve the merger of AA and USAir.
Virgin Atlantic has long been a darling of consumers. They pioneered more affordable business class seats that eventually forced other airlines to upgrade their transatlantic service. They were at the forefront of creating excellent inflight entertainment and using the better entertainment as an additional benefit to flying with Virgin. Plus, spirited Virgin Atlantic was always a thorn in the side of British Airways and kept transatlantic airfares lower than they would have been without Virgin.
The Delta buyout of half of Virgin Atlantic eliminates the most formidable competitive entity on transatlantic routes. If Delta gets antitrust immunity and permission to run a joint venture with Virgin Atlantic, competition will drop. Remember, Delta already operates joint ventures with Air France and KLM. It will give Delta and its partners about 25 percent of the transatlantic lift.
This is good for Delta shareholders, but bad for consumers. The loss of competition will mean increased prices, probably fewer flights and poorer customer service.
The other industry development is the rumored merger of US Airways with AA. A proposal to merge has been made by US Airways. If this merger is completed, consumers will find legacy airline competition reduced to three airlines. That is a number that is used to define oligopolies in anti-competitive literature.
Of course, the airlines will claim more competition, more flights, no reduction of flights to any hub and better customer service. But, when will the government learn that these promises are hollow.
We heard the same stories from Delta when they wanted to merge with Northwest. Now, Cincinnati Airport is a wasteland and fares in and out of that airport are among the most expensive in the nation. Consumers lost. Next in line is Memphis. Delta is cutting back there. Get ready.
When United and Continental merged, I sat at the same table with the CEOs of those airlines. Every promise that they made to the Senate Commerce Committee during the hearings about billion dollar savings, more overall Houston jobs, no reductions in flights and smooth computer integration have turned out to be wishful thinking, if not disingenuous.
Finally, after waiting since early January 2012 for release of DOT’s Passenger Protection 3 rulemaking and having faced a series of delays, consumers learned this week that the release of the proposed rulemaking will be pushed back from January 2013 to May 2013. That’s almost a year and a half of additional time that consumers have been forced to deal with hidden airline fees that should be available for booking and purchase anywhere airlines choose to do business.
This latest delay means that consumers will have gone more than half a decade without the ability to properly comparison shop for airline tickets. All this during a time that the airlines have been determined to make the ticket-buying-process more difficult to navigate.
Hopefully, the delay has been caused by a strong proposed rulemaking that will protect consumers and force airlines to disclose their fees. If so, airline passengers will be able to see clearly how much the total cost of travel will be.
All in all, it is not a cheerful Christmas scene for consumers when it comes to transparency, competition, comparison-shopping and holding down the price of travel.
Photo by Miamism Flickr Creative Common