The proposed merger of AirTran Airways and Southwest Airlines could meet little resistance from the Department of Justice, according to a report released Wednesday by the American Antitrust Institute.
Concerns over the elimination of competition on routes operated by both airlines could be mitigated because the overlap is small, the study said. And there is rivalry from other airlines on some of the routes.
However, the merger could also lead to higher fares and less choice for consumers, it said.
In September, the airlines announced they had agreed to merge in a deal worth $1.4 billion.
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It's expected to close in the first half of 2011, pending shareholder approval and antitrust approval by the U.S. Department of Justice.
It's the first significant merger of low-cost carriers in the U.S. domestic market.
With the merger, AirTran, which serves Wichita with three daily flights to Atlanta, would eventually be eliminated, removing the second-largest low-cost carrier from the market. "And the source of some of the most aggressive price discounting and market entry," the study said.
Combining with Southwest could mean less incentive for the combined airline to discount fares, it said.
"With the ranks of the LCCs (low-cost carriers) reduced through the merger of Southwest and AirTran, how effective will the remaining LCCs be at injecting price discipline in the industry?" the study said.
Pairing up the least aggressive of the low-cost carrier discounters, Southwest, with one of the most aggressive, AirTran, warrants some scrutiny, the report said.
If the Southwest-AirTran merger receives the kind of antitrust review as did previous mergers by legacy airlines, "we could probably expect a swift close to the investigation," the report said.
"Overlaps are relatively limited, and there are claimed efficiencies," it said.
But the DOJ must consider other factors, such as a transition from point-to-point service to a hub-and spoke model, changes in discounting, in the entry or expansion into markets and in capacity, the report said.