Problem:
I need help applying economic concepts to this situation:
Suppose you are an advisor to the U.S. Department of Justice, the agency with responsibilities that include, among others, the power to approve or disapprove proposed business mergers in the United States. You are faced with the following problem: The U.S. airline industry was staggered by the attacks, and the impact on travel and travel costs still continues . Major carriers, including United Airlines, U.S. Airways, and just recently, Delta and Northwest, have filed bankruptcy, and others are expected to follow. In addition to diminished demand for travel, the cost of running an airline continues to rise as the costs of greater security and increased fuel prices (driven at least partially by worldwide unrest) reflect in an airline's operating costs.
What policy towards the airlines should you pursue?
Should you try and convince government leaders to provide additional outright grants to airlines beyond those already granted?
What about loans or loan guarantees?
Should you stand back and let the market determine which airlines stand or fall? Should you encourage mergers, and, if so, based on what criteria?