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Do Fliers Gain When Airlines Consolidate?

November 16, 2006 By: Dan Butcher Travel Agent

US Airways Group Inc., which bid $8.67 billion to acquire Delta Air Lines, believes consolidation would help the troubled airline industry, but in the wake of US Airways' own purchase by America West, it's less clear how much consumers stand to benefit, the Wall Street Journal reports. Delta has rejected the offer by US Airways. But if the hostile bid should prove successful, analysts say there could be some advantages for consumers, but also some risks. Users of US Airways frequent-flier miles, for instance, could benefit from having access to Delta's extensive international route system. On the other hand, overlaps in service, especially in some Southern cities where both airlines have major operations, could reduce competition and lead to increased fares. What's more, persistent glitches in the process of integrating US Airways and America West raise concerns about customer service should the Delta bid succeed. A US Airways-Delta merger would create the country's largest carrier, with an 18% market share by available seat miles, an airline industry measure of capacity. Delta, the nation's third-largest airline by passenger traffic, has hubs in Atlanta, Cincinnati, New York (John F. Kennedy) and Salt Lake City. US Airways, which ranks No. 6, has hubs in Charlotte, N.C.; Philadelphia, Phoenix, Pittsburgh and Las Vegas. There is significant overlap between Delta's 6,795 daily flights and US Airways' 3,846, especially because both operate shuttles on the East Coast. So far, US Airways has disclosed little about how a takeover of Delta would affect each airline's operations. One exception: One of the two companies' overlapping East Coast shuttle services, which connect Boston, New York and Washington, would probably have to be sold to satisfy antitrust concerns, US Airways says. Beyond the shuttles, there is significant overlap in the South, with Delta's main hub situated in Atlanta and US Airways having significant operations in Charlotte. The concentration means that "it would destroy competition in the deep South," says Michael Boyd, president of Boyd Group Inc., an aviation-industry advisory group in Evergreen, Colo. Even outside of the South, the sheer size of the merged airline could create pricing power that pushes fares higher, especially along the East Coast.

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