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United Airlines has agreed to purchase Continental Airlines for the bargain basement price of $3 billion, thus creating the world's largest airline. Once again the upper management of both companies (along with the now heavily paid investment bankers) are touting the benefits that will be passed on to consumers in the forms of lower fares, better customer service and an overall better customer experience. Riiiiight.

In an industry where companies are continually struggling to deal with escalating oil and gas prices, and where demand from consumers has forced airlines to charge for once complimentary services such as food, extra leg room and headsets, how is this merger going to allow them to decrease prices? As stated in a previous post , less competition allows companies to charge higher prices, not lower. It doesn't take a P.H.D. in economics to recognize that. Tell me you are merging to gain additional routes that were not currently offered, tell me you are merging because it's cheaper to buy used planes from an existing carrier than it is to buy new planes, but please don't tell me that you are somehow going to change basic economics and will miraculously begin to offer lower fares in an industry where margins are already micro-thin. United Airlines has already begun charging customers for luggage on top of the price paid for the flight, so this deal is realistically just another way for them to collect more fees, all while making it look like they are going to be passing on the savings to you, the consumer. As our friend Flava Flav once said, "Don't believe the hype." Customers should brace themselves for longer wait times, fewer customer service represnetatives, and higher fares. Unfortunately it's just what happens in the wild world of Mergers and Acquisitions.

For more on the United Airlines merger, Click here. ]]>