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Morning News

Airline Expect Thomas Nulty Discusses Consumer Impact of Possible Merger

Aired January 8, 2001 - 11:31 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

DARYN KAGAN, CNN ANCHOR: A big airline merger is reportedly in the works this morning, that is according to the "Washington Post." American Airlines will announce plans this week to buy financially troubled TWA. The report also says that TWA will file for Chapter 11 bankruptcy protection on Wednesday. That would be the third time that that airline faces that.

Now, for more on this, and what it means to you, the consumer, we are joined now by Thomas Nulty. He is an airline expert, has been in the business a number of years, and can explain what it means to you and me, joining us from our Los Angeles bureau.

Tom, good morning. Good to see.

THOMAS NULTY, AIR TRAVEL INDUSTRY EXPERT: Good to be here.

KAGAN: Let's talk about it, in terms of two different types of consumers, one, if I am a consumer who lived in a major hub, like Dallas, or St. Louis, what does it to me?

NULTY: Well, if you are living in St. Louis, it may very well mean higher prices for you; and in fact it may mean higher prices all the way around, as these mega-airlines start taking over, there is one thing that is going to happen, and that is that prices will eventually rise.

KAGAN: What if you live in kind of a more far out place, like, let's say, Cheyenne or a smaller market, like -- well, Cleveland, Ohio, is not small -- but small.

NULTY: You might see some deterioration in service. But the reality is, if there are passengers there, enough to make airplane trips worth doing, then the airlines will continue doing them. So you probably won't see any reduction in service, it might actually make it easier to get from one point to another on a single carrier, so those are some of the benefits. But there certainly are some negatives as well.

KAGAN: Let's talk about those.

NULTY: Well, you know, one of them is certainly the pressure that the labor unions are going to be able to put on the airlines. We had some horrible problems in last summer with United Airlines. KAGAN: And we are starting to feel a little bit of it with Delta here in the Atlanta area.

NULTY: And you are feeling the same thing. Just imagine a United Airlines that is 50 percent larger, and an American Airlines that is much, much larger than it is today when they have labor problems, it could actually cripple the country.

KAGAN: I'm sorry, repeat that, please.

NULTY: If we have labor problems with a giant mega airline, they could actually cripple the country.

KAGAN: They could shut it down?

NULTY: They could actually shut things down, make it very, very difficult to travel, if we have fewer airlines. It is also putting great pressure on other airlines, like Delta, Continental, Northwest to do something in the way of a merger for themselves because they can't be left behind being much, much smaller than these two monster carriers that would be leftover if United-USAir goes through and if the American-TWA deal goes through.

KAGAN: But, bottom line, probably costs for the consumer will go up, whether it is from pressure from labor unions to have higher wages, or whether it is because you have fewer companies in the game.

NULTY: You will see costs go up, there is no doubt in my mind.

KAGAN: One other aspect of this merger, as they are trying to make it all work and get through the antitrust challenge, the D.C.-New York shuttle, they are talking about coming up with a unique operation between United and American, where they would alternate hours, but you could use a ticket on either one.

NULTY: You know, all this stuff is inter-related, this ability to merge all of these huge carriers. There are a lot of concessions that are going to have to be given, in order to make this thing actually happen, and that is just one of them. They are trying to make it palatable to the traveling public that these carriers are going to get so large. And that is one of the moves that they are thinking about making, at least as far as I understand it.

KAGAN: But really, bottom line, for us, the consumer, the flying public, we are stuck.

NULTY: The bottom line is that you are probably going to have an easier time getting from point to point because these mega-carriers will have a lot of services in a lot of places, but you are probably going to pay more for it.

KAGAN: All right, we will watch and see. Thomas Nulty, thanks for joining us, good to have you with us.

NULTY: Great.

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