The proposed $4.3 billion acquisition of US Airways by United Airlines would do more harm than good for the travelling public and lead to further industry consolidation, says the US General Accounting Office (GAO).

The study, by the investigative arm of the US Congress, was requested by the chief opponent of the deal in Congress, Republican James Oberstar, who is "deeply concerned" about the anti-competitive effects of the merger.

The acquisition is yet to pass anti-trust review by the US Department of Justice. Oberstar says approval of the deal, which was first announced last May, would force competitors to seek merger partners, reducing the US airline industry to three major rivals, and "resulting in a devastating loss of competition for consumers".

The GAO report says the merger between United, the nation's largest air carrier, and US Airways, which ranks sixth, "would significantly alter the current state of competition in the domestic airline industry". It says the mega-carrier would hold over 25% of the total US domestic market, taking $9 billion more revenue than the next largest competitor.

The merged airline "would leave other airlines with little choice but to respond competitively, likely spurring further industry consolidation", the GAO adds. The planned merger could also reduce or eliminate competition in 290 markets, in which 16 million passengers travelled in 1999.

The report also highlights possible benefits from the deal, including boosting competition in 65 of the top 5,000 markets, in which three million passengers flew last year. Service could improve and competition could increase in 256 further relatively small markets.

United insists the deal is pro-competitive, and US Airways says the GAO's mixed review "is no surprise".

Source: Flight International