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Report Says TWA Fares At Hub Airport Rose Faster After Merger

September 21, 1988

WASHINGTON (AP) _ A congressional study says Trans World Airlines fares rose sharply at its St. Louis hub after it became the airport’s dominant carrier through a government-approved merger.

The report on Tuesday by the General Accounting Office, the investigative arm of Congress, found that TWA fares at St. Louis increased more than twice the national average after the company’s 1986 merger with Ozark Air Lines.

In addition, the GAO said travelers from Lambert-St. Louis International Airport had fewer choices of competing airlines to many destinations after the merger.

The report is expected to add new fuel to the debate over deregulation and criticism that it has given airline industry survivors near-monopoly powers, producing higher fares and restricted service in some areas.

Don Morrison, a spokesman for TWA in St. Louis, said he had not seen a copy of the report and could not comment on its contents.

Sen. John Danforth, R-Mo., who requested the study, said lawmakers need to consider the possiblity of some type of air fare regulation in light of the GAO findings.

″At a minimum, Congress should consider steps to foster competition at concentrated airports, by removing obstacles to new carriers and boosting airport expansion to make room for new carriers,″ said Danforth.

The Commerce Committee is to hold a hearing on Thursday on the issue of airline concentration at hub airports, and Danforth vowed to raise the subject of air fare regulation.

TWA handled 56 percent of the passengers at the St. Louis airport before the merger but that grew to 82 percent in 1987, according to GAO. No other airline has more than 3 percent of the airport market.

After the merger, TWA provided service to more cities than it and Ozark combined had served before the acquisition. However, GAO said thu total number of destinations for St. Louis travelers dropped and more routes were served by single carriers after the merger.

The report found:

-TWA’s average fares rose between 13 percent and 18 percent in 1987 for 67 non-stop routes served by TWA and Ozark at the time of the merger. During that same period, the air fare portion of the Consumer Price Index increased 5 percent to 6 percent nationally.

-TWA’s average fares increased 13 percent to 19 percent on 53 non-stop routes from St. Louis in which it competed with other airlines while the competitors raised their rates by no more 8 percent.

-Smaller increases for TWA’s fares from Kansas City to those same 53 cities than the company’s flights out of its St. Louis hub. Although TWA’s Kansas City fares rose no more than 13 percent, competitors generally had falling ticket prices during the period, 6 percent to 8 percent less.

GAO said Kansas City was used for the comparison because ″TWA’s market share there was not affected appreciably by its acquisition of Ozark″ and travel distances to the cities were similar to those from St. Louis.

TWA, according to the report, attributed the increases to ″unusually low fares″ in 1986, when it was engaged in a price competition with Ozark and was trying to bounce back from an employee strike. In addition, the company said rates rose last year because it served more business travelers, who generally pay higher fares.

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