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turism&travel : Las Vegas resident sues to stop United-Continental merger

Thursday 01 July 2010

Robert D.
Conway of Las Vegas seems fed up with big airline mergers resulting in higher fares, reductions in service and more inconvenience for travelers.

In 2008, Conway was one of the plaintiffs in a lawsuit filed in federal court in San Francisco that unsuccessfully tried to block the merger of Delta Air Lines and Northwest Airlines on antitrust grounds.

Despite that setback, attorneys for Conway and other travelers returned to court Tuesday, filing a new lawsuit in the same court challenging the proposed merger of United Airlines and Continental Airlines.

Conway's attorney, San Francisco antitrust specialist Joseph Alioto, said he didn't want to make Conway available for interviews at this early stage of the case because plaintiffs sometimes say things that defense attorneys can seize on during litigation.

But Alioto said the Las Vegas man — one of 49 plaintiffs from across the country in Tuesday's lawsuit — is typical of individual and small-business travelers who would be hurt the most by the United-Continental merger.

“These are small-business people,” Alioto said in a telephone interview. “Travel is an important part of their business.”

The lawsuit alleges that the $8 billion merger, announced May 3, would result in “increases in prices and fares, elimination and/or curtailment of services, elimination or curtailment of frequency of flights, curtailment of capacity of aircraft and available seats for passage, elimination of tens of thousands of jobs, the deterioration of quality of service, the addition of charges for amenities otherwise considered part and parcel of the service, the elimination or substantial cutback of traffic to hubs, the creation of monopolies for passenger air traffic from and to major cities, and the encouragement and trend to further concentrate the industry toward ultimate monopoly.”

The lawsuit, seeking to block the merger, predicts that if the deal is cleared by regulators and survives legal challenges, American Airlines probably would combine with US Airways, the only remaining medium-sized carrier.

“Both of the CEOs of American and US Airways have already indicated publicly of their approval of the elimination of capacity and of their desire to further concentrate the industry and eliminate even more capacity, with the obvious result of higher fares,” the lawsuit alleges.

In Las Vegas, United and Continental are relatively small players in relation to the city's No. 1 carrier, Southwest Airlines.

After the 2005 merger of US Airways and America West Airlines, the combined company known as US Airways dramatically reduced Las Vegas flights to focus on its hubs in Phoenix, Philadelphia and Charlotte, N.C.

But no one can say if that was because of the merger or if it would have happened anyway as the recession reduced demand for flights to Las Vegas, and US Airways and America West were in poor financial shape to begin with.

Alioto said the proposed Continental-United merger can't be good for Las Vegas because the combined airline is expected to reduce capacity by 8 percent. That would probably result in fewer airline seats serving not just Las Vegas but important feeder markets to Las Vegas.

Particularly, the merger could result in fewer seats in the hub cities of United (Los Angeles, San Francisco, Denver, Chicago and Washington, D.C.) and in the hub cities of Continental (Cleveland, Houston and Newark, N.J.)

Even considering the small operations Continental and United have at McCarran International Airport, Las Vegas is among 17 domestic airports that would “experience undue increases in market concentration” as a result of the merger, the new lawsuit says.

United and Continental deny the merger would reduce competition and have called the deal necessary to ensure their viability. The industry's chronic inability to cover its costs has resulted in the bankruptcy court cases in recent years of United, Delta, Northwest, Frontier Airlines and US Airways.

William Swelbar, research engineer for the MIT International Center for Air Transportation, testified to Congress this month that the proposed merger would enable United and Continental to better compete both domestically and globally.

“The network carrier model (hub-and-spoke) of the 1980s and 1990s does not work in today's environment,” Swelbar testified. “Consolidation is a logical step to position airlines in a highly fragmented domestic and global industry to better weather the financial challenges that have caused years of economic pain for many stakeholders and a rising tide of red ink.”

United and Continental officials on Tuesday denied the allegations of antitrust violations in the lawsuit.

“We believe this suit has no merit, and we will vigorously defend what we strongly believe to be a transaction that is in the best interests of Continental, its shareholders and the flying public,” Julie King, a spokeswoman for Continental, said in a statement.

United spokeswoman Jean Medina said in a statement the airline is “cooperating with the Department of Justice as they thoroughly review our merger, which will benefit customers with the most comprehensive route network, connecting people across the world and the U.S., including 148 small communities.”

Autor: eTurboNews