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July 19, 2015

Passengers paying heavy price for airline mergers, analysis found

Customers are paying the price of reduced competition amongst airline companies in the US, triggered by mega mergers that have consolidated nine large US airlines to four, an analysis by Associated Press finds.

Customers are paying the price of reduced competition amongst airline companies in the US, triggered by mega mergers that have consolidated nine large US airlines to four, an analysis by Associated Press finds.

In the past decade, domestic airfares rose and analysts blame decline in competitive pressure as the reason behind the rise in the airfares.

The news agency conducted an analysis, which found out that travelers are finding their home airport dominated by one or two players out of these four companies including American, United, Delta and Southwest Airlines.

As par the number of seats for sale, a single airline company dominates 40 of the 100 largest US airports, and 93 of the top 100 airports are under the monopoly of one or two airline companies.

The overall domestic fares rose 5% in the past ten years, after adjusting for inflation, but the growth does not include the $25 checked bag fee and other add-on charges.

According to airline trade group Airlines for America, the fare increases is not solely a result of the mergers rather it reflects the rise in demand for travel.

However, the US Justice Department notified the four major airlines that it is investigating to know if the companies conspired to increase the fares by limiting the availability of flights and seats.

Several Airline companies found themselves financially vulnerable post 9/11 and after 2008 companies started merging.

The Justice Department antitrust regulators allowed some of the deals to materialise while stopped the order in order to encourage competition.

Presently big airlines have created a strategy to dominate one airport and forgoing marginal service elsewhere, which has altered the competitive landscape, and the average airfare, the analysis found.

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