Airline Merger Mania: Bigger Not Always Better

If, as passengers, we never felt the fallout of these disruptions, the issue might be a big yawn. But past mergers have given us graphic proof that two major airlines (or more) cannot undergo a shotgun wedding of their operations without at least temporarily disrupting their passenger service. This was the prime reason that in the America West, U.S. Airways merger, the corporate leaders wisely elected to go very slow in combining the two large operations, a move that has minimized the impact on their passengers. Whether they could pull off the same trick in swallowing an airline as big as Delta is another question.

Third, airline mergers begat airline mergers because the nonmerged will scurry around looking for a way to get bigger faster in order to compete. Unfortunately, that means that if Delta falls to U.S. Airways, the courtship of American, United, Northwest and Continental by each other and just about every other airline out there will end up providing better prime time soap opera than "Desperate Housewives."

And the ultimate fallout? We'll end up with fewer airlines overall, and larger operations charging higher prices, because of reduced competition, while providing reduced frequency and service. In other words, just what we need in an industry that has already learned how to squeeze seats together tightly enough to assault your kneecaps as they try to pack every plane with passengers paying too little to cover the costs.

And therein lies an important point: Airline prices are far too low to sustain the industry. Yes, I know. I'm equally guilty of jumping on the best bargains, and even after being a member of the industry for decades I, too, have come to look on an airline seat as having little direct value.

The truth is, it costs money to fly a seat from one place to another, and thanks to deregulation, airline leaders have been allowed to compete with one another in an ever decreasing spiral that long ago pegged the price of an airline seat far below its actual cost. It doesn't take a Harvard MBA to figure out that too many years of selling the product below cost results in the very bankruptcies we've been experiencing, and that, in turn, produces major airlines in bankruptcy court with ridiculously cheap stock prices that make them look like a bargain. So higher prices are a good thing at the same moment they feel like a bad thing. Reduced capacity and competition, however, is not.

What this all means, practically speaking, is that if this or some other megamerger occurs, we who buy airline tickets will have to pay very close attention to the major changes in ticketing, boarding procedures, and especially scheduling. Flights you've been used to for years between Airport A and Airport B may not be there any longer, and favorite departure times may shift or be replaced altogether.

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