The bad news about US airline mergers: higher prices and worse service

The passenger outlook for airline mergers: higher prices and poorer service. That was the opinion of travel managers and other big buyers of airline tickets surveyed by the Business Travel Coalition.

Three-quarters of corporate travel managers said in a recent survey of 98 travel managers and others that much talked about mergers will lead to higher prices and worsening passenger service.

--We’re going to pay higher fares,” said Cheryl Geib, national director of travel and meetings for the accounting firm Grant Thornton.

--Pro-merger airline executives have said they hoped to sell big corporate customers on the notion that a merged airline’s expanded route network would make booking travel for a far-flung sales force, say, a lot easier and that redeeming frequent flier miles would also be more convenient,” reports The New York Times.

Delta Air Lines is weighing a takeover of either Northwest Airlines or United Airlines, a unit of UAL. If those combinations do not pan out, Continental Airlines is expected to also consider seeking a merger partner.

If merger talks are successful, the US’s six airlines could be reduced to four, with further consolidation in the future.

Clearly, big customers are afraid of higher fares with fewer airlines. Nearly every airline chief has said the industry needs to raise fares, and even without mergers the rates are going up.

In the survey of the travel managers — including a dozen whose departments purchase more than $75 million in airline tickets each year — 74% said they would expect higher fares and 53% said they would worry about a decline in service.

Many travel managers also noted in the survey that they were worried that mergers would reduce competition and make it more difficult to negotiate discounts.

Many business travelers already believe service is bad.

--Customer service? What’s customer service?” one travel manager responded to the survey.

Another manager added: --Can it get any worse?”

Kevin Mitchell, who heads the Business Travel Coalition, said airline executives seem to think that full airplanes indicate that customers are happy.

--There’s a bit of denial in the industry about customer service problems,” he said.

Mergers would certainly mean reducing the number of flights in some markets, and shrinking or eliminating smaller hubs.

Report by David Wilkening

Tuesday, January 22, 2008

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