Thursday, December 14, 2006

Thank you for flying the friendly skies: The Times asks today whether, in light of the sheer volume of proposed airline mergers, consumers are really benefiting from the consolidation of the airline industry. Turns out that the answer is, like the old joke about the rabbi, both no and yes:

But whether consumers are always harmed by mergers is debatable. If a high-cost airline is acquired by another carrier, travelers may benefit.

A study conducted by Clifford Winston, an economist at the Brookings Institution, found that travelers would suffer, not surprisingly, if a number of airlines left the business. For example, in the year 2000, travelers would have lost $19.6 billion, attributable to higher air fares and less-frequent service, if Southwest Airlines did not exist.

But he also found that customers would have benefited over all that year, by about $3.6 billion, if US Airways had stopped operating, because its service probably would have been replaced by lower-fare airlines with more-frequent service.

He also found that travelers would have benefited by $3.7 billion if American had left the business, and $2.4 billion if Continental had left.

1 comment:

Philip L. Welch said...

This is pretty faulty reasoning—sort of like saying that if Lexus went out of business, everybody would benefit because cars would be cheaper. Does the idea of something being simply worth more money (even the same flight from the same source to the same destination) even exist for these people?