Originally Posted by cj001f
For the industry as whole consolidation makes sense - fewer players, presumably less competition, more pricing power. Perhaps less management, back office, and economies of maintenance scale.
For individual airlines it makes little sense. If they interline (not WN & B6) they can expand their network much cheaper by alliances and codeshares; things that are reasonably painless for the consumer and relatively easy to organize. At realistic merger scales there is no way to generate relevant economies of scale.
The issue is that when an examination of the airlines is carried out, it starts to get difficult to support the arguments. Maintenance is increasingly outsourced. The majors are large enough now that they're probably at our close to the best price they can get. Management positions may be reduced, but that's not a given. It may also not be a major cost savings. There are arguments about more favorable prices/lease rates for equipment, but there doesn't seem to be a good correlation (anywhere) between size and profitability.
Typically, industries end up being dominated by three or four players that control 80% of the market. The airline industry is getting closer to that position. I just see some structural barriers to further major consolidation.
I agree that it doesn't necessarily make a lot of sense for the individual carriers. In fact, the agreements they have created (SkyTeam, etc.) may actually be an impediment to further consolidation.
Now, if the foreign ownership rule is lifted in the US, all bets are off. Once treaties are in place to allow global consolidation, we'll see a feeding frenzy! I think the issue is that the US market doesn't need consolidation--the global market most certainly does.