* American CEO says airline fees are kept under control
* US Air, American merger deal valued at $11 billion
* US Air's Parker says believes no slot divestitures needed
By Diane Bartz
WASHINGTON, March 18 Lawmakers discussing the US
Airways Group plan to merge with AMR Corp, parent to American
Airlines, asked CEOs from the two companies repeatedly on
Tuesday if the deal would mean higher fares or reduced service
for the U.S. flying public, and were told it would not.
The merger of American parent AMR Corp and US
Airways, announced on Feb. 14 and subject to various
approvals, would create the world's largest air carrier. The
deal is worth about $11 billion.
Sen. Amy Klobuchar, the new chairman of the Senate Judiciary
Committee's antitrust subcommittee, argued the deal would mean
the top four U.S. airlines would control 80 percent of the U.S.
market, and that people needed to know if fewer airlines would
mean higher fares.
Further, she worried aloud, smaller cities were unlikely to
get convenient, inexpensive service.
Senator Mike Lee, the top ranking Republican on the
committee, agreed and noted: "Many of my constituents in Utah
complain about high fares flying in and out of Salt Lake City."
But Douglas Parker, CEO of US Airways Group, and Thomas
Horton, CEO of American Airlines, both repeatedly said that the
deal was good for consumers because it would make a new airline
that would better compete with Delta and United. And, they
argued, small cities would be helped.
"The way that those cities are served is through hub and
spoke airlines. There's not enough demand in most of those
cities for point-to-point service," said Parker.
Parker further argued that the American and US Air networks
were largely complementary, and that there was no need for the
airlines to sell any assets in order to win Justice Department
antitrust approval to move forward with the deal.
"We don't believe it would be good for consumers to divest
any slots," he said.
To preserve competition, U.S. antitrust regulators typically
require airlines to sell overlapping routes before approving a
merger. They consider potential price increases, efficiencies
and whether higher prices would inspire new companies to enter
Asked about barriers to entering the market, which might
include difficulty in getting access to airport gates or in
raising capital to buy airlines, Parker said: "The reality is
there are no barriers to entry in this business."
Instead, he argued, few companies have jumped into the space
because it is so competitive that it is hard to make any money.
The airline industry has seen five years of rapid
consolidation. Delta Air Lines acquired Northwest
Airlines in 2008, United merged with Continental in 2010
and Southwest Airlines bought discount rival AirTran in
With fewer big carriers competing, ticket prices have risen.
The average fare rose about 8 percent to $375 in the third
quarter of 2012, compared with $346 in 2008, according to the
U.S. Bureau of Transportation Statistics.
Horton also argued that the deal would allow the new
company, which would keep the name American Airlines, to create
a competitive counterbalance to other big carriers.
"I think the industry has done a pretty good job of keeping
a cap on fares," added Horton.
The U.S. trustee overseeing American Airlines' bankruptcy
asked the carrier last week to justify its offer of $19.9
million in severance pay to Horton, part of compensation linked
to the merger.
Horton became American chairman and CEO when it filed for
Chapter 11 bankruptcy in November 2011 and is due to serve as
chairman of the new American Airlines Group Inc until early
2014. US Airways' Parker will be CEO of the merged company.