Thursday, April 8, 2010

United and US Airways' merger is bad for the consumer

From today's WSJ:

Both companies' CEOs—US Airways' Doug Parker and UAL's Glenn Tilton—have loudly championed the need for consolidation tamong domestic carriers to cut capacity and allow fares to rise.
The older I get and the more experiences I have the more poignant and applicable Adam Smith's wisdom from The Wealth of Nations becomes. In it he warns, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
Why do the two airlines want to merge? So that they can cut "capacity" (routes) effectively sharply contracting the supply on some of the more sparsely traveled lines so that they can raise the prices. I'm no knee-jerk populist but if the two executives are already talking about conspiring against the consumer then it might be worthwhile for the regulators to take a closer look at this merger.