With airlines seemingly finally getting their acts together and returning to profitability after a terrible post-9/11 spell, talk in the industry is turning to consolidation. Analysts and even some airline executives complain there are still too many airlines, particularly the old-line network carriers, keeping capacity high and limiting profitability. Matchmaking between airlines including United, Continental, Delta and Northwest has been batted around as a way to potentially shrink capacity and boost fares.
But there are still serious stumbling blocks standing in the way which makes widespread consolidation unlikely. Airline mergers have a long history of failure stemming from the added maintenance costs of trying to combine incompatible fleets of aircraft and labor contracts that often need to be sweetened if unions are to go along with the deal. The end result has typically been a higher-cost carrier with more planes and more customers, but unable to compete on price. With that in mind, although it is easy to find airline executives who long for industry consolidation, it is much more difficult to find any who are willing to go through the process themselves.
The one exception so far has been Doug Parker, CEO of US Airways. Parker last year merged his America West Airlines with bankrupt US Airways, creating what he billed as the nation’s first low-cost network carrier. But Parker still has his hands full integrating those two airlines, and recent talk of labor unrest (see story) just a year after the America West/US Airways deal closed illustrates just how hard it can be to successfully merge two airlines.
As Delta and Northwest each prepare to exit bankruptcy, it is possible that one or both of them will be gobbled up by a rival. But odds are just as good that their emergence will do little more than lead to another round of commentary pining for future consolidation.—Lou Whiteman
See story about airline mergers from The Los Angeles Times
See story about US Airways labor trouble from The Arizona Republic
See related story from The Deal
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