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Former American Chief Crandall Rips DOJ on Merger

Former American Chief Crandall Rips DOJ on Merger

Bob Crandall is one of the smartest guys ever to manage an airline. (And no, I don’t consider “smart airline manager” to be an oxymoron.)

As an airline manager myself during the 80′s and 90′s, I watched Crandall push American to the forefront of world aviation, with innovations in operations, pricing, and marketing that remain industry standards today. Whenever he spoke at industry events or gave media interviews, I listened.

So it was with considerable interest that I tuned in to the Bloomberg interview with him following the announcement that the Department of Justice had filed suit to block the merger of his former company, American, with US Airways.

Predictably, Crandall excoriates the DOJ for what he considers a wrongheaded intrusion into the workings of the free market. “The government has it exactly backwards. If you want more competition, you don’t cut off the challenger’s legs before he gets in the ring.”

American and US Airways would be the challengers here, and blocking their proposed merger would be cutting off their legs. He refers repeatedly to the Delta-Northwest and United-Continental mergers, insisting that it is a business imperative for American and US Airways to do the same.

As you might expect of a former airline CEO, he sees competition solely through the lens of its benefits for the corporation, seemingly oblivious to its effects on consumers. In Crandall’s mind, its appears that consolidation is always pro-competitive.

Alluding to the fact that fares rose after the Delta-Northwest and United-Continental mergers, Crandall makes no apologies for the pricing power that comes with consolidation. “Well of course they went up. That’s what the mergers were all about, to try to bring economic stability to the industry.”

Can American compete without merging with US Airways? Crandall admits that it can.

“In the short term, both American and US Air will still be around. But in the very long term … unless they find a way to grow organically, they will always be behind Delta and United.” For Crandall, in other words, nothing short of being the largest player in the industry is enough.

Crandall’s remarks are mostly what you’d expect from a free-market apologist with a personal interest in a company whose fortunes took a turn for the worse since his tenure ended. Perhaps more enlightening is his analysis of the DOJ’s endgame in suing to ground the merger.

Crandall’s take is that the DOJ now considers it to have been a mistake to approve the Delta-Northwest and United-Continental mergers, and to approve the American-US Airways merger would be to follow a precedent that should never have been set. In other words, the DOJ is not just looking for concessions before signing off on the tie-up; their goal really is to halt the merger altogether.

Those of us who see consolidation as the enemy of healthy competition hope he’s right.

Reader Reality Check

Who’s right, the DOJ in blocking the merger, or Crandall in supporting it?

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