The department of justice (DoJ) last week sued to block the merger of US Airways (US) and American Airlines (AA). The merger would have created the largest airline in the world. That title today is held by United Airlines and/or Delta (depending on how you measure ‘largest’). The DoJs lawsuit states that the merger would be bad for consumers (travelers) in the United States as it would reduce competition in the marketplace. It would leave only four major carriers in the US (the new American, United, Delta and SouthWest). They assert that US and AA compete on ’1,000 routes’ where competition will be eliminated by the merger.
The ’1,000 routes’ statement got me intrigued. What 1,000 routes? For that matter, what is a route in their view? They certainly do not mean ‘flights’. (IAD – LGA is a route. There may be 5 flights in a day on that route by US Airways). So, I set about an analysis. Here is what I found.
The two airline combined fly 6,700 daily flights to 336 destinations in 56 countries – according to the merger website. Note, this is 6,700 flights, not routes.
There are 336 destinations. Every destination pair is a potential route. So, if the airlines flew on every possible route, there would be 112,560 routes (336 x 335). But US Airways and American Airlines do not fly every route. Almost all their flights originate at a hub or focal city.
US Airways has five hubs – Charlotte (CLT), Philadelphia (PHL), Washington Reagan National (DCA), New York LaGuardia (LGA) and Phoenix (PHX). American Airlines has five hubs too – Los Angeles (LAX), Dallas-Ft. Worth (DFW), Chicago O’Hare (ORD), New York JFK (JFK) and Miami (MIA). So, if we look only at flights starting at these 10 hubs, we would have a total of 3,350 routes. However, both airlines don’t fly to every route and so they certainly don’t compete on every route.
The routes they can potentially compete on would be routes they both fly (of course). That would only be routes between each others hubs. For example, US Airways flies from Charlotte (their hub) to Orlando (non-hub for either), but American Airways does not fly that route at all (no hub involved). Similarly, American Airlines flies from Miami (their hub) to Washington Dulles (IAD) (non-hub for either). Both however, fly between Dallas (AA hub) and Philadelphia (US hub). So, the only possible routes they complete on would be between their hubs. That leaves only 20 possible routes (5 x 4) that both airlines fly and hence compete on today! A far cry from 1,000.
What am I missing here? Are they looking at markets instead of airports – Washington area airports (IAD, DCA and BWI) are a market, so are New York area (JFK, LGA and EWR)? Even then, 1,000 routes sounds too high.
What is flawed in my logic? How did the DoJ get to 1,000 flights? Does anyone know?