A potential merger between US Airways and Delta Air Lines would force the combined airline to shed some overlapping services, but the sale of assets could open the door to low-cost competitors and spark a new fare war.
Experts say low-cost carriers such as Southwest Airlines and JetBlue Airways may view capacity cuts by a combined US Air and Delta as an opportunity to expand on the East Coast.
US Airways has said its proposed merger would cut capacity about 10 percent, a move that could involve selling assets, including airport gates.
Southwest has already expressed interest in any assets that may be sold. And experts predict other low-cost carriers would leap into a capacity vacuum as well.
"The low-cost carriers are not going to stand back. If they see an opening, they are going to strike," said Terry Trippler, an airline expert at travel club myvacationpassport.
US Airways Chief Executive Doug Parker has said that to avoid antitrust violations and redundancies in services, the combined airline would have to shed one of the East Coast shuttle services operated by US Air and Delta.
The combined airline also would likely sell gates in the Northwest and in Charlotte, North Carolina, Trippler said.
The airline industry has been battered by overcapacity and low-fare competition that makes it hard for major airlines to raise fares enough to cover their costs.
Typically capacity reductions mean less supply and higher fares. But US Airways noted that since its 2005 merger with America West, it has cut fares between 10 percent and 83 percent on 400 business routes and 350 leisure routes.
US Airways pins its prospects for success to the cost savings it says it can achieve by blending operations with those of another carrier.
The fare outlook hinges on the response to the merger from low-fare airlines like Southwest and JetBlue. If those carriers take over gates vacated by US Air and Delta, it could trigger a race to cut fares on the already competitive East Coast.
"I just do not believe that a merged airline will result in higher fares," Trippler said.
US Airways said in a letter to employees on Monday that a merger would see overlap on 10 nonstop routes that do not already have competing nonstop service. That number dropped to nine on Tuesday when AirTran Airways announced nonstop service between Phoenix and Atlanta.
But the outlook for fares is far from clear. At least one expert said a combination of US Air and Delta could fend off competitors in locations such as Huntington, West Virginia; Lynchburg, Virginia; and Augusta, Georgia, where those two airlines currently dominate.
Without low-cost competition in those markets, the new airline would be free to raise fares with little regard for the traveling public, said airline consultant Michael Boyd.
"There's no way you can paint this deal as being good for the consumer," Boyd said. "There are at least six communities that will lose all competition."
But such issues are for government regulators to decide, said airline consultant Robert Mann. He said the Justice Department will consider whether a merged airline presents any antitrust concerns.
There's no telling whether the government would view a merger as a potential antitrust violation or as the new industry paradigm, he said.
