United Airlines and American Airlines are the two biggest airlines in the U.S. They vie for the number one position in the market. American's acquisition of TWA this year made it the largest airline company. Between them, the two giants have approximately 40 percent of the market. They are archrivals in the transcontinental market. They are the only two U.S. airlines permitted to land at Heathrow Airport in London. Innovations are matched quickly, the airlines competing on factors such as frequent flyer programs, simplified fare structures, legroom, and routes, such as to Latin America.

But are they really competing? In some areas they are collaborating. When a flight is canceled, passengers are booked on the other company's flights. Now, United is bidding to take over US Airways, and sell some assets to American. They would jointly operate the Boston-New York-Washington D.C. shuttle. Continental Airlines' CEO has told the Senate Judiciary Committee, "The conspiracy by United and American to reach détente, create a cartel and control the U.S. domestic market will be so devastating that it should be disapproved outright." Corporate travel managers expect airfares to rise if the takeover is approved.

United and American disagree. They have higher cost structures than discounters such as Southwest and smaller carriers such as America West and Air Tran. As a result, they need to acquire other airlines to expand their network, appeal to more customers, and make the most use of their expensive assets.

(Updated August 1, 2001)