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Delta-Northwest Merger Still Murky

February 8, 2008 at 11:22 AM | 1 Comment

This whole Delta-Northwest merger talk has been going on for a couple weeks now, and we still don't know whether the two will get together. If they did, the new airline would be the biggest in the world. It'd also have a good shot at being profitable, given economies of scale and the inevitable firings that would be part of a merger.

Airline wonks are split on whether a deal would be good for passengers. The knee-jerk reaction is that anything limiting consumer choice is bad. Among the backers of that theory is the chairman of the House of Representatives Transportation committee, James Oberstar, D-MN. His take?

If we allow the creation of a global mega-carrier, the others cannot stand still to defend their market share, to defend their market interests. They too will have to undertake merger talks and ventures.

In his mind, government intervention is the way to ensure a free market. That argument doesn't seem too logical to us; merger proponents don't like the sound of it either. They point to the proliferation of low cost carriers as evidence that airfares will stay low, even if Delta and Northwest get together.

Whatever happens, we won't have much longer to wait: A deal could be announced within days. Better use up those NWA frequent flyer miles ASAP!

Related Stories:
· Airline Mergers Take Off [The Independent]
· Airline Mergers coverage [Jaunted]

[Photo: Cubbie_n_Vegas]

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Author Photo: pbb by pbb

1 Comment

Return to » Delta-Northwest Merger Still Murky

  1. Raphael

    Jaunted Member
    February 10, 2008 at 11:02 AM




    Delta-Northwest Merger Talks

    It seems the goal of mergers such as this is to achieve profitability by creating one BIG airline out of two marginally solvent smaller ones.  I think this is the wrong way.

    In the airline industry today, size is no longer the exclusive driver of value to the shareholder.  Sheer size can certainly assuage supply-chain woes, creating economies of scale and reining in costs- an attractive proposition in this age of rising fixed expenses.  But the real path to profitability for Legacy carriers is an overhaul the existing business model.  Take any of the LCCs: Southwest, AirTran, EasyJet, ryanAir, Atlas Blue... they are all smaller, leaner, internet-driven and highly profitable.  They have been able to develop ancillary revenue streams much more efficiently than the legacies, and have effectively demonstrated the benefits of point-to-point flights versus the limitations of the "hub and spoke" concept.  They have adapted to the prevailing demands of the travelling public, tethering their fortunes to internet booking and unbundling their core services.  

    In the process, LCCs have transformed themselves into thriving e-commerce enterprises, creating value for shareholders and maximizing profits; legacies are still trying to be the biggest kid on the block.

    Raphael Bejar, CEO
    Airsavings, SA  France

Return to » Delta-Northwest Merger Still Murky

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