What's the book corporate America doesn't want you to read? Find out now -- or you could get scammed.

4 reasons to call off the airline mergers now

February 27, 2008

Looks like the Delta-Northwest engagement is officially in trouble, which means folks like Kate Hanni and The International Association of Machinists and Aerospace Workers the can keep their powder dry for the next merger. Or maybe not.

A failure of Delta-Northwest to get off the runway could also endanger Continental-United, American-US Airways, and God only knows which other airline mergers the industry has in mind.

The sticking point on this particular deal, we’re told, is pilot seniority. According to an internal Delta memo that’s been widely circulated, the airline’s position is defiantly intractable.

Rest assured that we will not complete a transaction unless all of [our] conditions are met. We have a strong stand-alone plan. We will maintain our attention on executing that plan while we continue to look at strategic alternatives.

Ya hear that, Northwest? Just sign the prenup, already.

I hope it doesn’t. I can think of four reasons a moratorium on mergers is a good thing:

1. Lower air fares. More airlines means more competition, and that would invariably translate into lower air fares. I imagine every airline that’s contemplating a merger has a “strong stand-alone plan” just in case their corporate marriage doesn’t work out. Putting those plans into effect will benefit their passengers.

2. A smoother summer. As blogger Jared Blank points out, it could be a difficult summer if “4 of the country’s largest airlines are trying to jam themselves together.” In fact, it would make last summer seem like a cakewalk. And you remember last summer, don’t you?

3. A more competitive, less monopolistic airline business. Say it with me, folks. Less is not more. Less is less.

4. More jobs for airline employees. It’s clear that if these airlines merge, there will be fewer jobs. Who in their right mind — other than a greedy shareholder — would go for that?

Let’s hope Delta walks away from the altar. There is no downside to it.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

Tagged as: ,

2 comments

  • http://nexus-station.typepad.com/gentleman_agitator/ Tim Miller

    You are so right on these points. I have been stymied as to why Delta chose to start going on the airline version of Match.com after they worked so hard to come out of bankruptcy. That and surviving the hostile “Snidely Whiplash” take over attempt by US Airways. I can only guess that Icahn’s Paradus group is pressuring them or something.

    I mean, if there is a perfectly good stand alone plan, then go with it. So far, Delta is positioning themselves pretty well.

    Your number three point is spot on!

    I will say in response to another post of yours that I cannot see how the government could break airlines up. To what end? De-regulate some more? That’s what got us into this mess. What probably should happen is ending the safe haven of bankruptcy. Much as I love Delta, their management Leo Mullin etc. got them into that way and enabling the laws of business, they should have just gone under. So should have Northwest and any other that cannot make it. Alas, I know that it is complicated that we do not want to put people out of jobs and the hits to the economy etc. No easy answers. Letting some airlines go though might lead to more competition from new entrants. You just cannot them to be strangled in the crib by the big boys undercutting prices. Ok, rant over. You have some good posts here Ellliot. I am enjoying reading them.

  • James McDowell

    I might suggest Number 5 may be better coverage as well. I am old enough to remember flights to Richmond, VA, Rocky Mount, NC, State College, PA and other small airports. I can assume that others of that ilk would likely be knocked off the map in the mergers. (Also, remember Piedmont, Braniff, TWA, etc.?)

    I would also like to hear the “fortress hub” conversation merged into this one. I know that depending on the government to save us is both silly and, in some ways, anti-American, but I do think the current situation was partially caused by irregular, inconsistent or short-sighted de-regulation and regulation–I wouldn’t advocate no regulation, but somehow we almost seem to be in a worse position than we would with no regulation–and that regardless of fault, the FAA and the anti-trust groups at DOJ should ignore past precedent and start the analysis at the current point and say “No.”

Previous post:

Next post: