Airline Industry Consolidation

The airline industry generates operating revenues of $172 billion in 2007, amounting to over 1% of the U.S. gross domestic product. It carried more than 700 million passengers in 2007. Airline deregulation in 1978 led, at least in part, to increasingly volatile airline profitability, resulting in periods of significant losses and bankruptcies. In response, some airlines have proposed or are considering merging with or acquiring another airline. This report describes: (1) the financial condition of the U.S. passenger airline industry; (2) whether the industry is becoming more or less competitive; (3) why airlines seek to merge with or acquire other airlines; and (4) the role of fed. authorities in reviewing proposed airline mergers and acquisitions. Charts and tables.