Wednesday, July 22, 2009
Reuters ran a story last week on the latest rumors concerning a possible merger between Continental and United Airlines following the news that Continental's CEO Larry Kellner will step down at year's end. See Continental's CEO Shift Stirs Merger Talk, Reuters, July 17, 2009 (available here). According to USA Today's aviation travel blog, however, "most industry observers seem [to] think that the airlines will not transform their current alliance plans into another attempt at a full-fledged merger." Today in the Sky, Continental-United Merger Talk Renewed by CEO Shakeup? (July 20, 2009) (available here).
Regardless of whether or not the merger speculations are mere water cooler gossip, it is worth noting that any merger attempt by the two would likely meet much stiffer regulatory scrutiny than last year's Delta/Northwest link-up. With the Department of Justice's Antitrust Division promising "vigorous antitrust enforcement," Continental and United won't be the recipients of a "free pass." Given the degree to which the DOJ chose to involve itself in Continental's recently approved application to join the Star Alliance with full antitrust immunity, it's clear the Justice Department is taking seriously the impact the airlines' business ventures could have on consumers and competition. While healthy competition oversight is a worthy end, the DOJ should remain mindful of the changing air transport market and the reality that the classic competition models for air transport are outmoded. With consumer demand down and operating costs on the rise, both the domestic and international markets can no longer sustain the same level of multicarrier competition from a decade ago. Though neither Continental nor United may be in a position to consummate a merger at this point in time, an aviation marketplace with fewer participants is already taking shape; the DOJ should not stand in the way.