AMR, US Airways Get Clearance to Merge

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Nov. 12 (Bloomberg) -- Former U.S. Department of Transportation's Mary Schiavo, Cowen & Co.'s Helane Becker and Bloomberg's Cristina Alesci look at the AMR and US Airways merger. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The fact that there would be antitrust issues here.

The justice department is certainly framing this as a victory because you have the lower-cost dividers potentially getting the slots you just talked about.

In reality, who is the bid winner it?

U.s. air.

They were number five.

Combining with american makes them number three.

They will win a lot of stature.

The industry at large could be a winner here.

We have seen airfare rates go up for consumers.

The big question will be, does this merger present the furthering of the trajectory we have seen for airline prices?

Theoretically it should give them more pricing power.

The bigger you are, the more affect you can have on the market.

Thus one would assume airline prices move higher.

They move -- they will move higher without a doubt, particularly now that we are concentrated the power in three very large airlines.

Used to be called the southwest effect.

Wherever they went, they had a downward effect on pricing.

We have seen over the years they did not have that much effect in many markets.

Consumers choose frequency and timing.

Not just airlines are giving up slots at reagan and look wordier.

People will still choose the airline that goes where they want the flight to go.

Giving up a few slots will not hurt american and u.s. air at all and will come out on top.

Costs are going up.

Costs are going up, there should go up.

I do not think that is outrageous.

In terms of the gates they are giving up, in some cases jetblue and southwest are are ready flying some of those -- using some of those gates.

Not a lot.

I think it is a really big win for the airlines.

How is this a win for consumers?

I think when you look at the bidding process that is going to take waste, including southwest and jetblue will bid on some of the slots and bring in additional competition.

We're looking at it from that perspective.

Interesting that you bring up southwest.

A lot of people would say the marketing materials are a low- cost provider.

If you look at the yield.

Hard to see how southwest getting into the game will pressure downward at all.

Pushing prices down is not the only benefit the possibility for consumers.

Look at the jfk terminal, the jetblue terminal.

I will pick jetblue to fly out of jfk, even if it means an extra 20 or $30 because it is a nicer place from which to fly.

I will pick a nicer airline if they will give me a blanket and a decent meal.

That is definitely true, but the central heart of the argument is american could not emerge from bankruptcy as a healthy competitor to the top two airlines.

Essentially what any smart analysts are saying is the argument that not jive that much because if you look at americans results over the six-nine months, we have seen a real uptick in the business because of the fact they were able to charge customers more for the flights.

Yes, there are benefits definitely, but the real question is does this create for less competition.

Fewer players would seem watch a call to me.

Absolutely less competition.

-- fewer players would seem like less competition to me.

Absolutely.

The other problem american and old pan am and a lot of people had, other carriers had is they did not have the feeder system.

They do not go to a lot of places.

With us airways and america now combined, they have a great feeder system.

With that system and the other two major carriers, they will control so much of the traffic, it will be hard for jet blue other than the .2 point services, california to new york . a lot of challenges combining the company together definitely.

We have seen other airline mergers hit some rough spots.

That is for sure.

Thank you for watching.

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