Delta-Northwest merger: bad news for airline passengers?
The long-rumored announcement of Delta’s agreement with Northwest Airlines to take it over and create the world’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:
“For consumers, any time they lose options, that’s not good. Any time competition goes away that’s not good,†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.
“Legacy megamergers won’t increase the level of service operated, won’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,†said Hubert Horan, an aviation consultant. He added:
“The 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.â€
The National Business Travel Association (NBTA) recently surveyed its travel manager members to gauge the business travel industry’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 “inevitable.†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
David
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