American Airlines-US Airways Merger Creates Airline Oligopoly: Big Four Control 75% of Market

The Department of Justice approved American Airlines’ merger with US Airways after initially suing to block the deal, completing a five-year consolidation wave that reduced major U.S. airlines from seven to four dominant carriers controlling three-quarters of the commercial air travel market. The settlement requiring minor slot divestitures at Reagan National and other airports was cosmetic compared to the massive increase in market concentration.

The $11 billion merger created the world’s largest airline by passenger traffic and completed the industry transformation begun by the 2008 Delta-Northwest merger. Within five years, the industry had consolidated from over ten major carriers to the “Big Four”: American, Delta, United, and Southwest. These four carriers came to control approximately 75% of U.S. domestic air travel, with combined market shares exceeding 90% in many regional markets.

The DOJ initially sued to block the merger in August 2013, arguing it would harm competition and raise fares in hundreds of city-pair markets. However, the lawsuit was settled within three months after American and US Airways agreed to divest 52 slots at Reagan National Airport and gates at several other congested airports. Consumer advocates denounced the settlement as inadequate, noting that the slot divestitures represented a tiny fraction of the combined carrier’s operations and would do little to preserve meaningful competition.

The merger approval illustrated regulatory capture and the failure of antitrust enforcement. Despite clear evidence that airline consolidation had already produced higher fares, reduced service, and degraded quality, the DOJ accepted minimal remedies and allowed the deal to proceed. The settlement was widely seen as a face-saving measure allowing the DOJ to claim it had extracted concessions while effectively rubber-stamping consolidation.

The US Airways brand officially disappeared in October 2015, almost two years after the merger, as the integration was completed. American Airlines now operates the largest fleet in the world with dominant positions at hubs including Dallas/Fort Worth, Charlotte, Phoenix, Philadelphia, Miami, and Washington Reagan.

Consumer impacts of airline consolidation have been severe and sustained. Industry-wide capacity reductions allowed coordinated fare increases even as fuel costs fell. Average domestic airfares rose 13% between 2009-2018 after inflation adjustment, while service quality deteriorated through seat space reductions, eliminated amenities, proliferating fees, and reduced route options. The Big Four have systematically degraded the flying experience while extracting maximum revenue through sophisticated dynamic pricing and unbundling strategies.

The airline consolidation wave demonstrated the broader pattern of weak antitrust enforcement from 2008-2016 that enabled massive consolidation across the economy. Industries from pharmaceuticals to meatpacking to telecommunications observed that antitrust regulators would approve nearly any merger based on claimed efficiency gains, regardless of competitive harm. This permissive enforcement environment enabled the formation of oligopolies and monopolies across multiple sectors of the American economy.