Merger Conventional Wisdom???
Feb 9, 2008 | 6:43 am
#1
Original Poster
Join Date: Jul 2004
Location: Portsmouth, VA
Programs: One Pass Platinum
Posts: 166
Merger Conventional Wisdom???
An AP article today repeats what we have been hearing for some time now -- "Conventional wisdom holds that in mergers, airlines could reduce overlapping routes and raise prices."
Do all of the pratitioners of "conventional wisdom" who have been extolling the virtues of legacy carrier consolidation not know about Southwest, Jet Blue, Air Tran, or Frontier?? It seems to me that the discount carriers would love to see domestic cutbacks by the legacy carriers that would allow them to step in with added capacity and keep prices low. I'm trying to figure out how the legacy carriers who consolidate will gain domestic route pricing power.
Am I missing something??
Do all of the pratitioners of "conventional wisdom" who have been extolling the virtues of legacy carrier consolidation not know about Southwest, Jet Blue, Air Tran, or Frontier?? It seems to me that the discount carriers would love to see domestic cutbacks by the legacy carriers that would allow them to step in with added capacity and keep prices low. I'm trying to figure out how the legacy carriers who consolidate will gain domestic route pricing power.
Am I missing something??
Feb 9, 2008 | 7:35 am
#2
A FlyerTalk Posting Legend
Join Date: Apr 2001
Location: PSM
Posts: 69,232
Wirelessly posted (BlackBerry8830/4.2.2 Profile/MIDP-2.0 Configuration/CLDC-1.1 VendorID/105)
I think the "big if" is whether those other carriers can/will step in to compete. In many cases a consolidation of the legacies would result in minimal reduction of service (assuming an NW/DL and CO/UA pairing) of overlapping routes, and the routes that do get trimmed are likely to be lower yield. Even B6 and WN are avoiding the lower yield routes these days. Of course, if fares go up so do yields, making these same routes attractive again, so who knows.
I would continue to assume that the consumer will lose in a consolidation.
I think the "big if" is whether those other carriers can/will step in to compete. In many cases a consolidation of the legacies would result in minimal reduction of service (assuming an NW/DL and CO/UA pairing) of overlapping routes, and the routes that do get trimmed are likely to be lower yield. Even B6 and WN are avoiding the lower yield routes these days. Of course, if fares go up so do yields, making these same routes attractive again, so who knows.
I would continue to assume that the consumer will lose in a consolidation.