Tuesday, April 15, 2008

Is AmNorDelConU Air Just Around the Corner?

We’ve all heard about the proposed merger between Northwest and Delta, but what exactly does it mean for High Flying Birds? First, travelers can expect fewer deals and higher fares on some routes, because it could trigger a wave of consolidation within the airline industry. Continental Airlines has reportedly had talks with the parent companies of both United and American. And “[a]ny type of reduction in competition is not good for consumers,” according to the CEO of FareCompare.com, a price-finding Web site. Airlines generally try to keep flights as full as possible, and the proposed new carrier would likely continue that trend by decreasing the number of flights to the same locations, according to industry experts. Fuller planes and fewer available seats, in turn, would allow airlines to cut back on the supply of cheapest seats, charging more on average per seat. Check http://www.usnews.com/articles/business/your-money/2008/02/11/where-airline-mergers-would-hurt-travelers-most.html to see the cities on which US News believes the Delta-Northwest, or a potential Continental-United, merger will have the most impact. Looks like High Flying Birds in Minneapolis, Detroit and Memphis are going to be the big losers.

Second, combined with Northwest, Delta will be the #1 airline in the United States; #1 U. S. carrier to Japan; #1 U. S. carrier across Europe; #1 U. S. carrier in Africa; #1 U. S. carrier in the Middle East and India; #2 U. S. carrier in Asia; and the #2 U. S. carrier in Latin America. How long will American stand for that? Might we see a Continental-United-American merger? That can only bode ill for fares and choices in air travel. How about if all 5 of the big boys merge and we just have one national airline?

At the same time, however, the price of jet fuel has risen 55% in the past few months, while fares have only increased by 6%. Industry analysts say the fares must increase in order to offset the cost of fuel, but obviously cannot absorb the entire increase.

Regardless of whether we may or may not be in a recession, and whether airplanes will or will not fly based on the whim of the FAA, travelers so far have not indicated that they are going to decrease their air travel anytime soon. What effect do you think the merger and increased cost of jet fuel will have on your travels?

-- The Commish

3 comments:

Anonymous said...

Makes me wish even more we had a user-friendly rail system like Europe.

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