Airline mergers may be a good thing
Rumors of airline mergers are swirling in the travel world. Continental Airlines is dancing with United Airlines. Northwest Airlines has been flirting with American Airlines. AirTran is making a proposal to Midwest Airlines. And US Airways, already a merger of the old US Airways and America West Airlines, is now trying to swallow up Delta Air Lines.
Are these mergers a good thing? Or will they only result in bigger, less-friendly airlines that put the average passenger at a disadvantage?
The answer is more complicated than most people think. Though every merger is couched in language touting the improvements and benefits that will grow from consolidation, in fact there will be winners and losers in both the corporate and consumer camps. As soon as two of the majors tie the knot, the others will crank up the wedding music, and the ripples that ensue may soon grow into a tidal wave of change.
A quick look at the possible new combinations shows how much change would be involved. These proposals entail complicated rearrangements of complex public companies. The changes affect not only planes, pilots, flight attendants, mechanics and frequent-flier miles but also airline caterers, lawyers working on antitrust regulations, domestic and international route structures, airport leases, bondholders, new airplane contracts, airline alliances, IT structures, ground workers and, to a big extent, the other airlines not involved in the merger.
Some industry observers have outlined eloquent anti-merger points of view, citing the poor history of airline mergers and arguing, in particular, that there would be no winners if US Airways succeeded in wooing Delta’s creditors.
Pilots have also been skeptical about the mergers, citing problems that inevitably arise when trying to merge two separate unions. Flight attendants are even less supportive, having seen the sad outcome of American Airlines’ purchase of once-proud TWA. In fact, it is hard to find anyone in organized labor who publicly supports these mega-mergers, and no labor leaders will do so until they can see the fine print, as the trouble for union members has always been in the details of new work rules and rejiggered seniority lists.
It seems the only big winners would be the executives, lawyers and bankers who grow rich on fees, bonuses and options. But the merger of any two airlines will create opportunities for other airlines. When one group of airline workers loses jobs, another group gets new ones. When one airline cuts capacity, another moves in to fill the customer need (assuming the route is still economically viable). In some cases, having an old airline move out and make room for newer, more efficient airlines can be a blessing.
For example, every merger brings excess capacity and flights that will have to be discounted. If US Airways and Delta come to terms, the overlap of their route structures will mean some major opportunities for airlines like Southwest and JetBlue to purchase gates and routes, including the coveted shuttle service between Washington, D.C., New York, and Boston. With either Southwest or JetBlue flying the shuttle routes, the customer will certainly win.
Every expansion of Southwest, AirTran, JetBlue or Frontier means more jobs for their pilots and flight attendants. It means more contracts for caterers and maintenance workers. It means more ground personnel, more mechanics, more drivers and more cleaners. Of course, the airlines that lose routes will also lose jobs, but this is not a zero-sum game in the larger scheme of things.
So, when mergers are rumored in your neighborhood, take a step back and get a full view of how airline service will change. Yes, there will be short-term disruptions and problems. But in the long run, with healthy competition, these corporate marriages normally do not prove disastrous for the industry or consumers.
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