United & Continental: Merger or Monopoly?

Are monopolies making a comeback in America?

United Airlines announced today that it will buy Continental Airlines for $3 billion, and in the process become the world’s largest airline. The new super-airline will still be called United Airlines (though the company will be United Continental Holdings) and it will fly more than 144 million passengers a year to 370 destinations across 59 countries.

Various news outlets had reported that United was in merger talks with Continental as well as US Airways since the beginning of last month, but as Seeking Alpha points out, this decision actually dates back to 2008 when Delta and Northwest Airlines announced their own merger, making it the largest airline… until now.

The United-Continental deal still needs to be approved by the unions of both companies as well as by U.S. antitrust regulators. There are 13 “nonstop routes” where the new company would effectively have a monopoly, but according to the Huffington Post, the Delta merger included 12 such routes. This time could be different though. "Many in the industry have wondered whether the Justice Department under the Obama administration will be as inclined to approve a mega-airline as it was under George W. Bush," the Huffington Post reports.

Still, industry insiders say the odds are good that the big merger will be approved, but it does raise questions of whether American companies are becoming too large for their own good.

Earlier this year, Ticketmaster got approval from the U.S. Justice Department to merge with Live Nation, essentially guaranteeing it control over the domestic concert industry.

The FCC is currently reviewing a potential merger between Comcast and NBC. And the FTC may be close to suing Google for its recent purchase of a mobile advertising company, which some fear may give it a monopoly over digital advertising.

In the case of United though, the new super company will still face significant competition from other airlines. But as one analyst told CNN Money, these sorts of consolidations and mergers may be the key to airlines surviving in this tough market.  If that’s true, it’s not inconceivable that given our struggling economy, we could one day end up with an airline that does actually qualify as a monopoly of sorts.

First banks, now airlines are getting too big to fail.

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