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Airline Merger Mania Bad News for Consumers

By Dan Schlossberg
ConsumerAffairs.com

December 29, 2006

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Democrats don't merge with Republicans. The Yankees don't merge with the Mets. And United Airlines doesn't merge with Continental. Not until now, anyway.

A United-Continental merger is just one of a half dozen airline merger rumors -- some imagined, some sought, and others denied. Their common denominator is a desire to stay in business even if it means cutting staff and fleet size.

The impact on consumers -- already reeling from 23 hikes in airline ticket prices over the last two years -- could be devastating. After all, less competition means fewer choices for budget-conscious flyers.

Even before it begins, the new year might be marked as the year the aviation industry dwindled down to a precious few.

Consider these merger possibilities:

Though none of the mergers are a done deal -- Qantas quashed its takeover bid and Delta executives rebuffed US Airways -- the groundwork has been laid. Officials of ailing airlines are privately envious about the successful merger between America West and US Airways, an airline that successfully regrouped after a long bout with bankruptcy.

Not surprisingly, United CEO Glenn Tilton is a strong proponent of airline consolidation, which he says would boost revenues through cost-cutting, while Business Travel Coalition chairman Kevin Mitchell warns against it.

While Tilton says merged airlines would save money by cutting staffs and fleet sizes, Mitchell says they would also resort to raising revenue by hiking ticket prices.

Even without mergers, carriers have battled increased operating costs caused primarily by runaway fuel prices. JetBlue, the innovative JFK-based discounter, even reduced the seating capacity of some planes from 156 seats to 150 to lighten aircraft weight and meet Federal Aviation Administration (FAA) rules that mandate one flight attendant per 50 passengers.

It can thus eliminate one attendant per plane while saving money on fuel by flying a lighter load.

Other carriers may follow that lead, even if they manage to fend off merger attempts. Mitchell hopes they succeed, saying further mergers would be "disastrous" for passengers.

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