The Dallas Morning News published a front page story this last weekend detailing how the Department of Justice is using the airline industry’s own history of antitrust allegations to challenge to the merger between American Airlines and US Airways.
Michael Lindenberger, the reporter who wrote the piece, includes several comments from two legendary airlines industry executives who competed fiercely during the early era of airline deregulation: former Braniff CEO Howard Putnam and former American CEO Robert Crandall. From the article:
Crandall says trying to lay blame on the industry for trying to make enough money to stay in business is beyond foolish.
Most airlines, he notes, have long since gone out of business — and more will, if they can’t price the tickets high enough to recover their costs. “No company can survive for long if it charges less than what its product costs, and every company — in every industry — seeks to maximize profits,” he said.
What this case really ought to be about, he said, is whether the bigger American will provide tougher competition to Delta and United. Everything else is a distraction.
“And animal spirits being what they are, three big tough guys will rough each other up more frequently than only two big tough guys. That’s the argument for the merger in its simplest form — and I think it is right.”
Putnam hasn’t invested in or worked for airlines in years. But he sees things in a similar light.
“I was shocked when I heard the DOJ was opposing the merger,” he said. “I think it’s a very good deal for the industry. I agree with Robert Crandall, and I never thought I’d hear myself say that.”
During his work to write the article Mr. Lindenberger posed several questions to Mr. Crandall in an email exchange. That exchange is itself an interesting read and Mr. Crandall is characteristically blunt in his criticism of the DOJ:
One can speculate all one wants to – the facts are pretty clear. Justice made a mistake by approving Delta and United, and now wants to make another by denying AA and US an opportunity to compete on even terms.
Doesn’t make sense for employees or investors at US and AA, doesn’t make sense for the communities where AA and US have hubs – which would increase in size if they combined – and it doesn’t make sense for consumers or the nation.
You can read the entire email conversation here.