Yeah, domestic capacity is reduced in the short-term. But with all the used planes hitting the market after one of these mergers, it won't be any time at all before they get snapped up by a start-up low-cost carrier, and viola, domestic capacity returns close to previous levels.

I don't get why we need mergers of the legacy domestic airlines to reduce capacity. History has shown that every time there is a reduction in capacity, it's not long before another airline increases capacity to fill that void. Net result is domestic capacity doesn't really shrink. Look what happened in the US in the early/mid-1990s, after Eastern and Pan Am went under, CO de-hubbed DEN, and AA did the same at BNA and RDU. In the wake of all that, a rash of new discount airlines started up (often with the old planes that had been discarded as part of mergers and bankruptcies), and domestic capacity continued to grow. A new Frontier stepped in at DEN, AirTran and ValuJet grabbed EA's old gates (and DC-9s) at ATL, WN ramped up operations at many airports that legacy carrier had downsized. Why would it be any different now?

I think the legacy carriers are far better off to work on their product, labor relations, and customer service, and compete on those factors to gain market share, rather than making larger shareholders and high-ranking executives wealthier in the short-term through ill-advised mergers that really make no sense.

Have we discussed all the possible mergers yet? No, I don't think so. So, here's what I proposed - CO/WN.

If CO/AA with dual hubs at IAH/DFW is not a problem, than I think CO/WN at IAH/HOU must be a great idea too! Together they'll own Houston-Dallas market and drive AA out of it. Then they can increase prices from $100 to $200. What? You're going to drive I-45?

In fact, they'll be so strong in Houston that the combined airline can raise prices 200% on all routes. Cincinnati will no longer be the highest-price market in the country. Think about all the money pouring in to the new company.

And, WN gets what it most lack - NYC. They tried Islip, they tried ATA. Nothing worked. But WN/CO? Wow! Together they can drive US out of the whole Northeast and have them retreat back to CLT only.

CO gets what it's weakest - California.

Can you believe how strong the new combined company be? Largest domestic by far, widest international coverage. Owned CA, TX, NYC area, and still have a strong presence in Chicago with WN at Midway.

Fleet integration? No problemo. All Boeing, mostly 737s.

What you do guys think? :p

If you look at the LCCs in the US today, they are buying new planes, not old ones: B6, FL, WN, VX.... they're using current gen planes, not old planes. The first planes to go in combination carriers would be DC9's/-80s and 737 classics. No US carrier is going to want those old planes, even the new ones, which are these days predicated on being clean and cool. Look where CO's 735's are going: Russia. Expect the rest of the old planes to either retire to the desert or find new ex-pat jobs in Russia, the far east, south america and africa.

Except that I don't see how one launches a low-cost carrier flying MD-80s, which is what would fall out of a CO/AA merger. Like Hartmann, I really like the MD-80s (significantly better than a 737), but they are old, burn fuel, and are expensive to maintain, so the airlines hate them. Any LCC that tries to make them the backbone of their fleet will go the way of Independence Air.

Except that the traveling public (as a whole) does not choose their carriers on product or customer service. They choose on price and schedule. A merger offers the promise of lowered costs (via shedding old planes) and improved scheduling (via sheer size). Now, whether the promise actually pans out is another question, but at least it is there.

<shrug> So?

Maybe all CO needs for the time being is 4.

When open skies finally comes to fruition I'd guess the competition to/from LHR will intensify and the fares, while still lucrative, may not be so as to their former extent. Regardless I do not think BA or VS (or UA or AA for that matter) will not take kindly to the new players coming into the market.If memory serves AA is the largest carrier to SA followed by CO in #2 and DL in #3 (I do stand to be corrected) and yes...I guess I can see some merit in solidifying ones grip, or stranglehold, on SA.

But to pursue all the pain, frustration and issues of a merger to realize an increased presence in a market where both carriers already do quite well in seems like a poor choice. Not that I'm saying CO (or AA or DL) should not do whatever is necessary to beef up their presence in lucrative markets but again I think, from my armchair, there are easier ways to increase CO's SA presence than through a merger with AA.No.Perhaps...but how strong is AA on the west coast?

I know they provide strong feeds to QF in LAX and would suspect they also feed other various OW partner flights - but still, where does AA fly from the West coast? NRT & LHR plus a handful of p2p flights from the larger cities?

I'm not saying doing so does not make financial sense - if it did not I suspect we'd see AA realign their routes and schedule - but again...going though a merger to acquire this?

I still think that's too high a price to pay...again from my armchair.
Why on earth would CO want to merge with a carrier just to turn around and cut capacity?

Seems like a costly way to do so -- especially when the LCCs will swoop in to eagerly replace the lost capacity.

While I think you're spot on in how all these issues are relevant in some way for every combination out there, I would say there's significantly higher amount of issues with a CO + AA tie up. If DL does go with UA than I suspect NW will become one of the prettier girls out there as they have a strong presence in Asia, 787's and a strong agreement with KLM (or KLMAF...Groupe de AFKLM....or whatever the hell they call themselves)

J.Edward: I think you might misunderstand my point. I'm not saying that CO/AA is a great idea or better than any other, just that it could happen and that someone could come up with some reasons as to ways it could make sense. But, a couple of things you mention, I'm not sure I get:

1) You talk about CO "wanting to merge"? Who says they have any choice in the matter? They can't pursue a merger with any carrier of size on their own terms. NW holds the cards and CO has to watch and wait. If merger mania comes, CO will be stuck either trying to go it alone at a fraction of the size of the big boys, or merge with whoever is left. If I'm LK, I don't particularly like either option.

2) Why do you think carriers are not looking to cut domestic capacity in a merger? Every article I have seen regarding a merger either quotes some industry analyst or some airline CEO talking about how they need consolidation because there is overcapacity.

I guess my point is just that CO isn't big enough to stop any of this from happening. If the industry is shaken up, then they will have to go along. I mean, if we have DUAL, and AA goes shopping, would CO be better off with AA, or becoming a larger, East Coast AS, unable to compete on cost with the LCCs and unable to match the route network of the newly bigger boys?

Could we get some more popcorn in this thread? I'm feeling too lazy to get off the couch (at the Saucer, of course).

Agree 100%. Will never happen due to anti-competitive result on Latin America routes and Southern US. Can't eliminate either IAH or DFW (though AA did eliminate STL after TW buyout). But it just doesn't make sense to have hubs so close, just as US had PIT/PHL/BWI/DCA/IAD/CLT at one time. Now only PHL and CLT remain.

UA/CO or NW/CO makes far more sense. UA and CO international don't have much overlap, nor do UA/CO domestic. CLE would definitely disappear, and perhaps DEN, as they have the least O/D traffic. And would it make sense to keep both IAD & EWR?

NW/CO makes even more sense - and easier to integrate FF programs.

Yes, but what's the point? Capacity never gets cut permanently. It just results in shifting it from one airline to another. That was my main point above. Consolidating the legacy carriers just opens up more opportunity for the LCCs to grab, which they will. I also find it hard to buy the overcapacity argument when flights are running as full as they have been for a couple of years now. Sure, cutting capacity while demand is high allows you to charge more, theoretically increasing profits. But those higher fares also result in increased demand for LCCs, which will replace the reduced capacity. The net result is that capacity really hasn't been reduced; it's just been shifted from one airline to another. And in the end, the legacy airlines have given away more of their market share to the LCCs. You even stated that most passengers buy on price only. Yet airline mergers in the US have traditionally resulted in increased competition from LCCs, which just comes back to haunt the legacy airlines. So why should the legacy airlines go through messy mergers that will just anger passengers and employees (they always do), drive loyal passengers away, and result in increased competition from LCCs, who will probably still have lower operating costs than the merged legacies?

I think there is a market still for full-service, business-oriented airlines in the US that are more focused on customer service and having a complete route network than just selling cheap seats to a limited number of major cities, with live TV in the seat back. WN, B6, FL, F9, and the like are fine for some travel, but they can't get me to most of the places I need to go for work, nor can they get me to many of the places I want to go on vacation.

My point was that this is what has happened before. Some of today's very successful LCCs, like F9 and FL, started flying with cast-off 73S and DC9 equipment (the 1990s equivalent of the MD-80 today) because it was cheap. Even in Europe airlines like EasyJet got their start with the old cast-offs of larger airlines. And it happened in Canada with WestJet as well. And guess what, the flying public didn't really seem to care much. They turned a profit, and used those funds to quickly dump the old planes and replace them with shiny new A-318s, 319s, 717s, and 73Gs. Granted, the LCC market has changed today from what it was 10 years ago -- back then no thrills was the name of the game; now it's live satellite TV and XM radio. But even if no start-ups are interested in something like AA's ratty MD-80s or NW's DC-9s that were built during the Johnson and Nixon administrations, the fact is that passengers are utilizing that capacity now. If it's gone after a merger reduces capacity, who is going to pick it up? A LCC probably will, whether it's with tired old MD-80s or shiny new A-319s.

I think this is exactly right. As long as there are airplanes ready to fly, and capital to get 'em off the ground, I don't see how airlines (in the long run) can get and keep pricing power based upon capacity controls. It's just too easy for another carrier to meet the pent up demand.

On no! :eek:

Another week, another story.

Familiar face [Gordo] pushes airline merger

Nothing really new here but if you like reading about this stuff than I'd suggest you skim the article.

I wouldn't be opposed to a DL/CO merger.

Found this on that "other" co employee site. Here is the link.


UAL ponders talks
By Justin Baer in New York

Published: January 19 2008 02:00 | Last updated: January 19 2008 02:00

United Airlines is considering a new round of talks to merge with Continental Airlines if its negotiations with another rival, Delta Air Lines, end without an agreement, people familiar with the company's plans said.

Glenn Tilton, United chief executive, an outspoken proponent of industrywide consolidation, signalled yesterday that the Chicago-based airlines could still strike a deal even if Delta merges with Northwest Airlines. Delta opened negotiations with both United and Northwest earlier this month, the people said.

United and Continental discussed a possible merger a year ago after US Airways made a hostile bid for Delta, which was then under bankruptcy protection, the people said.

Those talks cooled after Delta rejected US Airways' advances, but the two sides remained in touch, they said.

United and Continental declined to comment.