Delta Merger? Good for Wall St. but What About Cheap Airfare Sales?

January 11, 2008 | Posted in: Airfare Increases, Airlines, Cheap Airfare Sales

Some scary news for air travelers: the “m-word.” As in, “mergers.” Background: I was reading some interesting analysis from Merrill Lynch today; it mentioned that after the Wall St. Journal reported Delta was gearing up for merger talks with Northwest and United, the stocks of the 3-airlines zoomed upward. Another interesting nugget: if one merger deal is made, Merrill Lynch believes other deals will be done, and soon (deals that could include the airlines named above, as well as Continental). Good news for the financial community, but what about the rest of us? What about cheap airfare sales? Here’s a couple of simple formulas: Mergers = Less Competition; Less Competition = Higher Airfare. I think we can all do this math.

2 Responses to “Delta Merger? Good for Wall St. but What About Cheap Airfare Sales?”

1. Elliot says:

   January 11, 2008 at 11:04 pm

   I don’t necessarily agree. I admit, I’m not an expert, however, before you call me crazy, I have a valid reason – Really, I don’t believe the airlines really care about the passengers anyway (at least not more than they have to).

   Anyone who believes the legacy carriers are doing things for passengers because they are passenger-focused is not seeing behind things.

   For example, take United, who will claim they are focused on the needs of their passengers. They have Economy +, and will market this as showing that they are giving passengers what they want – more legroom. In reality, its not about what a passenger wants, but a marketing and revenue tool, for the airline to encourage frequent flyers to stay with them. Sure, there are a couple of rows less in a plane, but now thousands of frequent flyers who will pay extra $$$ to sit in the seats that are available. If they really cared about the passengers, they wouldn’t be raising the “fuel surcharge” by $25 each way.

   In fact, I think, at least in the nearer term, a merger could actually help passengers. Again, I’m not crazy (or working for any airline), I know all the arguments against it. The fact is, the airlines will likely need to make many promises in order to convince agencies like the DOJ to allow the mergers. They will have to follow up on those promises, but have nothing they are bound to today.
2. Rick Seaney says:

   January 14, 2008 at 11:08 am

   Elliot, I would never think well thought out commentary is crazy … I don’t agree with you however; time and time again I have seen what lack of competition can do to a city like Cincinnati and dozens of smaller regional airports. It is not a pretty sight when airlines have no checks and balances in a city…