Smaller Airlines Seek to Merge as Dominant Carriers Tighten Grip on Market
The pressure is mounting for smaller airlines to merge with others in order to gain access to more planes and airport gates, as the nation’s four dominant air carriers continue to exert their dominance and control over the market.
This became increasingly apparent on Tuesday when JetBlue Airways attempted to convince a federal judge in Boston to approve its acquisition of Spirit Airlines for $3.8 billion. Similarly, Alaska Airlines proposed acquiring Hawaiian Airlines for $1.9 billion over the weekend.
The outcomes of these proposed mergers could greatly impact the companies involved and the U.S. airline industry as a whole. With four companies controlling more than two-thirds of the national market and maintaining dominance over major airports, the stakes are high. If approved, these mergers would be the largest in years, representing a significant shift in the industry.
The last major wave of airline mergers occurred in 2013 when American Airlines combined with US Airways. Now, the industry is largely controlled by Delta Air Lines, United Airlines, and Southwest Airlines, leaving smaller carriers struggling to compete.
The dominance of the big four airlines played a significant role in JetBlue’s defense arguments during the trial, as the U.S. Justice Department brought antitrust charges against its acquisition of Spirit. In response, JetBlue argued that smaller airlines need the network breadth to compete effectively with the larger carriers.
However, the Justice Department countered, arguing that the acquisition would eliminate a key source of competition and lead to higher fares for consumers. They estimated that the deal would ultimately cost consumers $1 billion to $2 billion annually in higher fares.
This highlights the ongoing tensions between smaller airlines and the dominant players, with the smaller carriers advocating for the benefits of increased scale, while the government raises concerns about potential anti-competitive practices and the impact on consumers.
The trial and impending decisions underscore the broader trend of consolidation in the airline industry, raising questions about market competition, consumer choice, and the balance of power among carriers. As the landscape of the airline industry continues to evolve, these mergers may have far-reaching consequences for both airlines and passengers.