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CNN Today

Could Airline Mergers Mean More Trouble for Travelers?

Aired February 1, 2001 - 4:32 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOIE CHEN, CNN ANCHOR: Air travelers could soon face another dilemma: fewer choices when it comes to which airline to fly. Today a Senate committee heard testimony on one of two proposed air carrier merger deals: American Airlines' acquisition of cash-strapped Trans World Airlines.

CNN's Patty Davis reports on that.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Consumers had better fasten their seat belts and hang on to their wallets.

PATTY DAVIS, CNN CORRESPONDENT (voice-over): Those words of warning from a rival airline executive as American's acquisition of bankrupt TWA took the spotlight on Capitol Hill. But American and TWA executives argue consumers would be better served if TWA doesn't go belly-up.

JOE LEONARD, CHAIRMAN, AIRTRAN AIRWAYS: In my view, the proposed transaction is the only comprehensive solution that adequately serves the consumers in light of the harsh realities facing TWA, its employees and retirees.

DAVIS: When it announced the deal last month, American promised to keep most of TWA's 20,000 employees on the payroll and continue operating TWA's St. Louis hub.

But lawmakers say it's industry consolidation they're worried about. The American-TWA deal comes on the heels of another proposed mega-airline merger between United and U.S. Airways.

SEN. RON WYDEN (D), OREGON: The bottom line for me is that when you look at this entire array of mergers that's on the table, it's going to suck up most of the competitive juices that are left in the airline sector.

SEN. JOHN MCCAIN (R), ARIZONA: This would result in two airlines controlling approximately 50 percent of the U.S. market.

DAVIS: An analysis by the General Accounting Office estimates the American-TWA deal would reduce competition in more than twice as many markets as it would help. The United-U.S. Airways merger would cut competition in four times as many markets as it would benefit. Even so, some passenger groups support the mergers.

DAVID STEMPLER, PRESIDENT, AIR TRAVELERS ASSOCIATION: We approve of both the American Airlines acquisition of TWA and United's acquisition of U.S. Airways on the ground that it's important to preserve this airline service at a time when the airline system is running close to capacity.

(END VIDEOTAPE)

DAVIS: But congressional critics say, with record delays wreaking havoc on air travel and possibly fewer airlines to choose from, consumers could end up paying the price one way or another.

Patty Davis, CNN live, Capitol Hill.

CHEN: Joining us today to talk about the increase in delays and the spate of mega-mergers is Thomas Nulty of Navigant International, a travel management company.

Tom, welcome back; good to have you back with us again.

C. THOMAS NULTY, NAVIGANT INTERNATIONAL: Good to be here.

CHEN: Great; OK, talk to us about the relationship -- I mean, is there any relationship between what's happening in the mergering and mergering and mergering of all these airlines and then the delays?

NULTY: Well, you know, they're probably not totally related.

The one thing that might be related, however, is the union activity. Unions will be very, very strong in these merged airlines and have a lot of leverage. This summer we saw exactly how United Airlines' pilots used that leverage, and we saw Delta's pilots doing it later this year.

And I think that leverage could very well hurt us, especially as these airlines get bigger and bigger.

CHEN: You know, we talk about the delays -- and I think all of us who travel a bit have had that experience -- the delays are up, we know that; is it really a volume problem?

NULTY: You know, it is partially a volume problem. At La Guardia Airport, for example, over the last several years they've allowed many, many more flights into La Guardia airport. And as a result of that, I think almost 1/3 of the delays that were recorded in 2000 really happened at La Guardia Airport.

And you know when an airplane is late out of La Guardia, it goes to other places and is sort of late all day long after that, so...

CHEN: But how do you fix that?

NULTY: How do you fix it? Well, there are a couple of ways. One, we have to do something about our air traffic control system. It's not as adequate as it should be; they keep trying to improve it.

Boeing yesterday, for example -- there was an article about how they are offering the FAA to fix the system with a satellite-based system rather than the ground-based radar system. And they've even offered to loan the government, I think, billions of dollars to do it. They obviously have a vested interest in being able to get more airplanes into airports, however.

CHEN: All right; well, I guess the other way to handle the volume problem is to cut back the number of flights.

NULTY: Yes, when you cut back the number of flights, though, what happens is that customers end up spending more money. It's a supply and demand issue; if you have fewer flights, you have fewer seats, the airlines will have fuller airplanes. And the fuller their airplanes, the higher the price will go.

So it's a -- while that is an alternative, it may not be one that customers would really like.

CHEN: And it doesn't look like one that's actually going to happen any time soon, either.

Thomas Nulty of Navigant International, thanks very much for you insight...

NULTY: Great to be here.

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