Press Release: Antitrust Concerns Unlikely to Derail Proposed United-Continental Merger

11-May-2010

California concentration could prove a speed bump to approval

Cambridge, MA - May 11, 2010 - The proposed merger between United and Continental is unlikely to be blocked on antitrust grounds according to a new report from Cambridge Aviation Research.  The Quick Take report "Antitrust Concerns Unlikely to Derail Proposed United-Continental Merger" uses domestic market share data to estimate the effects of the proposed merger on competition at the industry-, airport-, and route-levels.  The report quantifies these effects using the Herfindahl–Hirschman Index and compares them to guidelines published by the Department of Justice, "red-flagging" markets of concern.

"With relatively little overlap in their route structures, the proposed merger of United and Continental raises red flags at only 17 domestic airports," said Jeffrey Breen, president of Cambridge Aviation Research and primary author of the report. A similar study conducted last month found 26 red-flagged airports caused by the potential combination of United and US Airways. "But with more than a third of the red-flagged airports in California, management needs to address these markets proactively and publicly," advised Breen.

Key findings include:

• After years of losing domestic market share, this merger merely turns back the clock for United to early 2000. Even on the heels of the just-completed Delta-Northwest merger, this proposed combination would only restore the industry's market concentration to its levels of 2002-2003.
• At the airport level, 17 U.S. airports are red-flagged for increases in market concentration, exceeding the DOJ guidelines. From most-affected to least: Newark (EWR), San Francisco (SFO), Vail (EGE), Houston (IAH), Los Angeles (LAX), Yampa Valley Colorado (HDN), New Orleans (MSY), Cleveland (CLE), Denver (DEN), Chicago (ORD), San Diego (SAN), Orange County (SNA), Honolulu (HNL), Ontario California (ONT), Las Vegas (LAS), Tampa (TPA) and Sacramento (SMF).
• More than a third of red-flagged airports are in California.  Airport officials and existing or potential airline partners should be engaged proactively to begin to address the imbalances in these and other highly visible markets.

The Quick Take report is 12 pages long, contains 5 figures, 4 tables, and 3 spreadsheets and is available for purchase and download from http://www.cambridge.aero/store

About Cambridge Aviation Research

Cambridge Aviation Research has provided custom research and analysis services to the aviation industry since 2005.

Contacts:

• Cambridge Aviation Research media relations, media@cambridge.aero

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