ATA buyout may be start of US air consolidation
It was not a failed merger such as US Airways’ highly publicized attempt to take over Delta, but with ATA Airlines buying World Air Holdings, some observers say it is just the start of future US airline consolidation.
ATA Airlines parent company ATA Holdings says it is paying $315 million to buy World Air Holdings in a deal that has to be approved by stockbrokers.
The deal brings together two companies that rely heavily on charter businesses but operate similar fleets. Both maintain bases in Oakland.
Analysts say the move is part of a flurry of talks among airlines that will lead to other announcements of buyouts and mergers, though some are wary this is good news for consumers.
Kevin Mitchell, the chairman of the Business Travel Coalition, said if such a “tsunami” of airline consolidation were to occur, fares would rise as competition waned.
“Proposed mergers will lower labor and other costs further and with fewer choices available for consumers, the airlines will earn nice profits on the spread between the lower costs and the higher prices they can charge,” said management consultant Peter Cohan. He added:
“While airline shareholders may benefit, consumers will suffer. “
ATA was one of the fastest growing U.S. carriers earlier this decade. But the Indianapolis-based company ultimately ran into financial trouble and was forced into Chapter 11 bankruptcy protection. ATA dismantled much of its domestic route network.
ATA has rebounded due mostly to an alliance with Southwest. In that deal, Southwest gained access to many of ATA’s assets at its former hub at Chicago Midway.
The deal also has a “code-sharing” provision that allows the airlines to sell seats on each other’s flights. That helps ATA by funneling connecting Southwest customers to ATA’s destinations, such as New York LaGuardia and Washington National. Southwest benefits by selling connecting seats on ATA’s extensive network of flights to Hawaii, wrote the AP.
“There are interesting synergies between ATA and World Air Holdings. North American Airlines is a small carrier — 10 planes — that had operated from Oakland, Calif., while ATA last year moved its San Francisco operations to Oakland,” wrote the Pacific Business News.
“Also, ATA is the nation’s largest military charter airline and runs more civilian charters than any other carrier, while World Airways operates in the same business with 17 wide-body aircraft. World Airways gets three-quarters of its business from contracts with the U.S. Air Force,” the report added.
The parent company of ATA Airlines has also changed its name to Global Aero Logistics Inc. and is acquiring the parent of North American Airlines, Pacific Business News.
“The name change better reflects our company’s diverse, worldwide operations,” said new CEO Subodh Karnik.
Report by David Wilkening
David
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