Ratib Ali analyzes whether a merger between United and American Airlines would pass merger review according to the 2023 Merger Guidelines and finds that under multiple market definitions, it would substantially lessen competition.
On April 14, reports emerged that the CEO of United Airlines floated the idea of merging with American Airlines with the federal government. Analysts have already commented on the uphill battle faced by the suggested merger. This article analyzes a hypothetical United-American merger under the economic thresholds from the 2023 Merger Guidelines flagging if a merger is likely to substantially lessen competition and compares it to the Department of Justice’s challenge of the Northeast Alliance between American Airlines and JetBlue in 2021. Even though American’s CEO rejected the merger, an analysis of market data can provide empirical support for why this merger was a nonstarter and reminds readers of the framework used by antitrust practitioners to analyze airline markets.
How economists (quickly) evaluate mergers
Mergers are generally evaluated using the Herfindahl-Hirschman Index (HHI) measure of market concentration. HHI is defined as the sum of the squares of the market shares, with higher HHIs corresponding to higher levels of concentration. For instance, a market served by two airlines each having a 50% market share has an HHI of 502 + 502 = 5,000, whereas a market served by a monopoly has an HHI of 1002 = 10,000. Under the Merger Guidelines, mergers are “presumed to substantially lessen competition or tend to create a monopoly” if the post-merger HHI is greater than 1,800 (or the post-merger market share of the merging parties is 30%) and the change in HHI is greater than 100.
Economists care about market concentration because economic theory and reality both show that concentrated markets are associated with higher prices and fewer choices for consumers.
Many markets will become monopolies
Airline markets are often defined as nonstop travel between origin-destination pairs. For example, Boston-Dallas is an airline market, in which multiple airlines, flying in either direction, operate. In my analysis, I define a market as an origin-destination airport pair—for example, Boston Logan Airport-Chicago O’Hare Airport.
Analyzing publicly available data from the Department of Transportation on air travel for the first quarter of 2025, I find that the proposed merger would cross the Merger Guideline’s thresholds for anticompetitive concentration in 158 domestic markets. Forty percent of these markets are currently a duopoly served only by United and American, such as Chicago O’Hare to Tulsa, Syracuse, or Hartford, which would become monopolies after the hypothetical merger. Another 20% of these markets, such as Chicago O’Hare to El Paso, Palm Beach, or Albuquerque, would go from three airlines to two airlines under the merger.
Some may argue that the relevant market is not an origin-destination airport pair but an origin-destination city pair. Put differently, a Boston to Chicago Midway flight may be a reasonable substitute for Boston to Chicago O’Hare. As a robustness check, I reran the analysis using city-pairs as the relevant market. This redefinition only reduces the number of domestic markets that meet the Merger Guideline thresholds for concentrated markets by one, to 157. About 25% of markets become monopolies, such as Chicago to Syracuse or Miami to Sacramento, while another 30% become duopolies, such as Chicago to Cincinnati or Charlotte to Newark. As is conventional, I calculate market shares using revenue from transporting passengers on nonstop flights.
While 40% of the 158 markets involve Chicago O’Hare, other routes include Miami to San Francisco, Philadelphia to San Antonio, and Dallas-Fort Worth to Washington Dulles, to name a few. It is important to note that Chicago O’Hare is the only U.S. airport where both American and United maintain a hub. All 158 threshold-meeting markets involve a major hub airport (Charlotte, Chicago O’Hare, Dallas Fort/Worth, Denver, Houston Intercontinental, Los Angeles, Miami, Newark, Philadelphia, Phoenix, San Francisco, or Washington Dulles).
Comparison with the Northeast Alliance
In 2021, the Department of Justice sued to block the Northeast Alliance between American Airlines and JetBlue, analogizing their coordination of flights to a merger. In that complaint, the DOJ identified 11 markets involving Boston and 17 markets involving NYC (JFK or LaGuardia) as endpoints that were threatened with or had experienced reduced competition. Even before the complaint was filed, the Northeast Alliance had proactively excluded some markets in which the partnership would have produced particularly high HHIs, underscoring the index’s probative value in alleging anticompetitive harm.
In contrast to the concerns raised by the Northeast Alliance, which involved 28 markets total, a hypothetical merger between United and American raises competitive concerns under the Merger Guidelines presumption of harm in at least 158markets. The DOJ’s Northeast Alliance complaint did use a higher HHI threshold—a change of 200 points, not 100, per the 2023 Merger Guidelines—to identify markets that may experience lessened competition. If I were to use the same threshold, 151 markets would still experience substantially lessened competition.
Alternative market definitions
If instead of an airport pair I defined an airport as a market, the merger would be presumed to lessen competition in 19 major airports like Chicago O’Hare (where the HHI increases from 3,460 to 6,475) and Los Angeles (where the airlines’ combined market share is 35% and HHI increases by 600), as well as other smaller airports like Greensboro, NC (HHI increases from 3,370 to 5,450) and Key West, FL (HHI increases from 2,285 to 3,885).
Nationally, United and American both serve 15% of all domestic passengers, jockeying for the number three position behind Southwest and Delta. On a national basis, the HHI increases from 1,350 to 1,810 points, crossing the Merger Guideline’s threshold based on the merging parties’ combined market share.
No matter how one defines the relevant market, the proposed United-American merger would substantially reduce competition.
Conclusion
Structural remedies in airline mergers usually involve merging airlines to give up airport slots (and sometimes airport gates) to competitors. However, there are only three airports in the U.S. that are slot-controlled and which have been the focus of slot divestitures in the past: JFK, LaGuardia, and Washington Reagan Airports. Since most of the markets with competitive concerns in this merger do not involve any slot-controlled airports, structural remedies would be insufficient in addressing the concerns.
Even with gate divestments at O’Hare Airport (or another affected airport), the merger will still eliminate head-to-head competition among two established incumbents who individually enjoy economies of scale. The remedy will transfer gates to another airline unlikely to be able to achieve scale or incorporate O’Hare Airport into its business strategy in the short run in order to meaningfully discipline the affected markets.
As such, if a merger between United and American were seriously contemplated, the merging parties would face a tall order to prove that a merger would not be detrimental to U.S. consumers. The facts do not favor it, regardless of how one defines airline markets, and one would ordinarily expect the DOJ to sue to block such a proposal.
Author Disclosure: The author worked on the lawsuit against the American Airlines-JetBlue Northeast Alliance while working as an economist for the Antitrust Division of the Massachusetts Attorney General’s Office, a co-plaintiff to the suit. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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