Yesterday, American Airlines and U.S. Airways reached a settlement with the Justice Department, avoiding a trial that could have stopped the $11 billion deal to combine the two airlines.
Now the two carriers are free to combine and create the world’s largest airline, but they must make room for low-cost competitors at seven airports.
NPR’s Marilyn Geewax joins Here & Now’s Meghna Chakrabarti to discuss what the merger entails and how it could affect holiday travel.
MEGHNA CHAKRABARTI, HOST:
From NPR and WBUR Boston, I'm Meghna Chakrabarti. It's HERE AND NOW.
Thanksgiving is just a couple of weeks away, which means we're heading into the holiday travel season. And yesterday we talked about the merger between American Airlines and U.S. Airways that is now moving ahead. The two carriers reached a settlement with the Justice Department, avoiding a trial that could've prevented the $17 billion deal. And that deal creates the world's largest airline with one caveat: It must make room for low-cost competitors at seven American airports.
So today we're going to take a look at what this means for the industry and for passengers. And joining us to do that is NPR senior business editor Marilyn Geewax. Marilyn, great to have you back.
MARILYN GEEWAX, BYLINE: Hi. Great to be with you.
CHAKRABARTI: So is this merger a win for customers?
GEEWAX: You know, there are few consumer advocates out there who feel that the deal doesn't go far enough. But most of the experts, you know, if you read the commentary over the last 24 hours, pretty much everybody thinks it is a good deal for consumers. And here's why. You know, when you step back and look at the big picture, what's happening with the airline industry - you know, in recent years, it's been terrible. So many of them, they've all basically gone into bankruptcy. U.S. Airways was in bankruptcy twice. American Airlines is still bankrupt. They're still trying to get out of their bankruptcy court hearing.
So you've got a lot of problems in the industry, and they need to get more profitable so that they can do things like buy new equipment and install Wi-Fi on the planes and upgrade their baggage handling capability. So the industry needs to develop a business model that's going to work for the 21st century. And they've kind of figured out that what they need to do to make it work is to have fewer empty seats flying around in the air. That means they had to consolidate. So you had United and Continental get together, Delta and Northwest, and now you've got American and U.S. Airways getting together.
So yes, that takes seats out of the air. It means there are fewer competitors. But the three who are left will be stronger and bigger, and they'll be able to compete head to head. And then you've got these new slots opening up at airports that will allow more discounters to pick off at least some of the leisure travelers. So you'll probably have kind of a two-part system where the business travelers, the frequent flyers, will be on the big carriers that go everywhere. And when you want to go see grandma, you'll probably be on one of those discount carriers.
CHAKRABARTI: I hope so. I mean, so let's talk a little bit more about that. At seven American airports, there must - the American-U.S. Airways merger has to make room for some of these discount carriers. But when we say discount, I mean sometimes it doesn't really feel like the price difference is all that much.
GEEWAX: Well, here's what's happening in the industry. Under this settlement those seven cities are going to be Boston, New York's La Guardia, Washington - that's Reagan National - Miami, Dallas, Chicago, L.A. In all of those places, these two carriers, American and U.S. Airways, when they get together, they're going to have to give up some of these really desirable slots. They're going to have to make room for their competitors.
And you might say, well, gosh, you know, but this overall fare seemed kind of high. What's happening? What the industry is figuring out is that they need to charge fees for everything. They're offering some very low fares. There really are discounts out there. But you have to pay for your seat assignment. You have to pay for your bag of peanuts. Just all of these fees get piled on.
CHAKRABARTI: It piles on.
GEEWAX: And that way you can kind of choose what do you need out of the air travel system by just separating everything into these packages where, you know, you've got - if you're a college student who's skinny and you got a backpack and a granola bar, you can jump on a flight when you want, you'll have a - you'll be able to find cheap flights. But if you're that business traveler who needs a primetime flight into New York, you're probably going to pay pretty much.
CHAKRABARTI: Well, Marilyn Geewax, NPR senior business editor, always great to talk to you. Thanks so much.
GEEWAX: Oh, it's great to be with you.
CHAKRABARTI: This is HERE AND NOW.
ROBIN YOUNG, HOST:
It's HERE AND NOW.
Impassible roads, bad weather and a damaged airport tower have hampered efforts to get aid to the typhoon-ravaged areas of the Philippine island of Leyte. A stampede at a rice factory on the island caused a wall to collapse, killing eight people. The Philippine's National Food Authority said police and soldiers were helpless as people streamed into the warehouse and carried off more than 100,000 sacks of rice.
Pastor Amado Perez is a Filipino and a member of the United Pentecostal Church International of Hazelwood, Missouri. He lives there, and he told us earlier today about what he saw when he sailed into Leyte's Port of Ormoc.
AMADO PEREZ: When we docked at the port, the picture that met my eyes, I could describe it in two words: total devastation. Electric poles knocked down. Coconut and rice plantations were severely devastated. And, you know, the smell is very bad. People are carrying on their shoulders rice and anything that they could get from warehouses. It looks like a war-torn area.
YOUNG: And now the mayor of Tacloban, a city on Leyte that was leveled by the typhoon, is telling residents to leave that city. Transcript provided by NPR, Copyright NPR.