This strategy would be likely to lead to the greatest mutual profitability, while strong competition across the board could prove suicidal. Moreover, as each major carrier becomes larger and stronger, it would become increasingly difficult for new competition to gain a foothold in a market. This is not surprising. Faced with such market dominance, the remaining carriers are likely to seek their own mergers just to stay competitive. Foreign air carriers, such as British Airways and KLM, faced with competition from the American behemoths, also will be forced to grow in order to compete in international markets.
Merger mania goes global.
Two years ago, we had the opportunity to preview airline consolidation when the General Accounting Office examined the impact of proposals by the six largest U.S. carriers to form three alliances. The GAO found that if all of the proposed alliances were implemented, competition could be reduced for about 100 million passengers each year. By this action, Congress clearly expressed its interest in ensuring that competition in the airline industry remains intact. Immediately following the United-US Airways merger announcement, I called upon Transportation Secretary Rodney Slater and Assistant Attorney General Joel Klein to examine the merger vigorously, to look beyond the merger itself and consider the domino effect it will set into motion as other airlines seek to merge in order to compete. This is not what we had in mind when we deregulated the airline industry in 1978.