The decision by US Airways not to proceed with merger talks with United may bode well for the future of cheap airplane tickets and cheap vacation packages. Generally the more major airline competitors in any given market the greater downward pressure on their pricing. US Airways ended merger negotiations after learning that United prefers merging with Continental Airlines.
US Airways executives were irked with their counterparts at United, thinking that they were close to finalizing a deal. Apparently United was simply using US Airways as leverage for other deals it is interested in pursuing.
United declined to speak about specific merger plans but continues to speak openly of the benefits it believes the airline industry will realize from consolidation. Continental refused to comment about the situation.
If United, currently the third biggest airline in the U.S., were to combine with Continental, which is the 5th largest airline, the combined airlines would become the worlds largest carrier. Currently that position is held by Delta.
Continental and United enjoy antitrust immunity to cooperate in operating their international routes. This immunity, which was approved by DOT (Department of Transportation), enables them to share proprietary market information, assign routes, and together set prices and negotiate travel contracts with corporations. They manage the immunized portions of their networks as if they were merged.
United and Continental have been not been able to take full advantage of their immunity because of a clause in Continental pilots contract which does not allow Continental to share joint revenue with any other U.S. airline. Continental is currently trying to renegotiate this stumbling block so that it can work closer and possibly even merge with United.
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