15 April 2008

Delta-Northwest merger: bad news for airline passengers?

The long-rumored announcement of Deltaââ¬â¢s agreement with Northwest Airlines to take it over and create the worldââ¬â¢s biggest carrier: good or bad news for consumers?

The joining of Atlanta-based Delta and Eagan, Minn.-based Northwest, if approved by regulators, will result in combined annual revenues of $31.7 billion, vaulting it ahead of the Fort Worth, Texas-based AMR Corp.'s American Airlines for the top spot in the U.S.

It would be the biggest carrier in the world in terms of traffic, before any further domestic capacity cuts and any divestitures that might be required by antitrust regulators.

The merger was viewed by airline consultant Mike Boggs as a logical one. But he added:

ââ¬ÅâœFor consumers, any time they lose options, thatââ¬â¢s not good. Any time competition goes away thatââ¬â¢s not good,ââ¬~ Mr Boggs said.

Skeptics who predicted service would not improve were easy to find. The biggest impact, according to critics, may be the severe toll the merger could take on customer service and competition in the airline industry.

ââ¬ÅâœLegacy megamergers wonââ¬â¢t increase the level of service operated, wonââ¬â¢t improve the quality of customer service, could easily increase costs and reduce efficiency, and would increase overall financial risk while seriously damaging certain portions of the capital structure,ââ¬~ said Hubert Horan, an aviation consultant. He added:

ââ¬ÅâœThe only way megamergers could overcome these problems and generate a net increase in corporate value is by artificially distorting competition, or to put it directly, by screwing consumers.ââ¬~

The National Business Travel Association (NBTA) recently surveyed its travel manager members to gauge the business travel industryââ¬â¢s reaction to potential airline consolidation.

Eighty percent of respondents to the survey, conducted prior to the official Delta-Northwest announcement, predicted further consolidation of the US airline industry by 2009 was ââ¬Åâœinevitable.ââ¬~ Only twenty-two percent saw such consolidation of the domestic airline industry as a positive development for the business travel community, however.

Transportation Committee Chairman James Oberstar, a powerful Democrat from Minnesota, has said he would use all of his political clout to pressure the Justice Department to block a Delta-Northwest deal.

"I would, and I will, and I am fighting this merger," said Oberstar, who has long opposed airline industry consolidation. "Mergers are bad for aviation."

The announcement comes a year after the two carriers emerged from Chapter 11 bankruptcy protection. Both carriers are losing money again but are in much better shape than the four much-smaller airlines that have filed for bankruptcy or gone out of business in recent weeks.

Northwest and Delta overlap relatively little in the US, which could help them gain antitrust approval, according to the AP.

Report by David Wilkening

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• Better than Delta going away all together and "screwing" the many people holding Delta tickets and FF miles.
  
  

  I have been a professional full time travel agent for 8 years and we all know something has to "give." Either some of the competition has to go away so that fares naturally rise or the airlines will have to increase fares across the board. Look at fares historically. People are paying now what I remember paying 20 years ago for destinations like Europe and Florida. How can the US Legcy carriers stay in business with the increase in salaries and the high cost of fuel. The public is just going to have to deal with higher prices or drive. How sad that only one US Airline has ever been financially solvent (Southwest). Lisa Jerome Travel Escapes

  By ljerome, Thursday, April 17, 2008
• look beyond your noses
  
  

  What customer service? Airline customer service was sacrified years ago. It's time to thin the herd. I'm very tired of our tax dollars subsidizing bad business decisions. Why are we bailing out bankrupt airlines (and other businesses) when they can't make it? Has the government ever bailed you out of financial problems? Come on-Continental has done it (claimed bankruptcy) 4 times and their VP's still get multi-million dollar bonuses with our tax dollars- it's insane

  By Sherri Gouddou, Thursday, April 17, 2008
• Airline Diaster
  
  

  Another airline diaster to add to all the other diasters the airlines have created and continue to create. What do they care about the traveling public? They take advantage of our need to travel and to fly. They can use the fuel increase as another excuse. But they don't even bother to excuse themselves

  By aqemanuele, Thursday, April 17, 2008