Is merging a good thing? In some cases, yes, some cases no. But now everyone is on the merger bandwagon. When one thinks about the Ma Bell breakup, and the fact that Ma Bell seems to be rising from the grave…one wonders about the future and megacorporations.
For airlines, the experts say that the airlines will be on a better footing if there are less of them. As CNN Money comments, it can also mean higher fares in many markets. Part of the problem, the experts say, is excess capacity, but the public will be hurt by fewer choices and less capacity certainly means the remaining seats will cost more.
On the other hand, when fares rise, new startup airlines can rise to take the place of airlines eliminated by mergers. Jetblue has been in existence for only six years and already has expanded admirably…although that is part of its current problem.
Speaking of Jetblue…known for its quality service, airlines will have even less pressure than now to keep their service levels high with no competition. Already, with several options between cities, we are often, as passengers, subjected to dirty planes, overworked and underpaid crew who are therefore a bit disinterested, and so on. Planes fly from Point A to Point B. After fares, which are often matched between carriers, it is the experience that distinguishes one from the other.
Today, Airtran made a hostile bid to buy Midwest Express. Midwest controls over 50% of the Milwaukee market, where it has its hub. Airtran is powerful in Atlanta and Orlando, but has a good distribution. The two have not incompatible products but from the looks of it, Midwest, like Delta with its own hostile bid, prefers to go it alone.
However, if they make the offer attractive enough, Airtran, who intends to pursue it despite rejection, could succeed. And an Airtran-Midwest merger…two airlines with a minimum of overlap, would create a bigger, more powerful airline in a more positive manner than combining Delta and US Airways, or Continental and United.
In our opinion, if airlines must merge, as seems to be the trend, it should be two airlines that complement each other, but do not significantly overlap. It may not answer the experts’ demands that capacity be reduced, but it does allow airlines to cut costs, grow, and maintain competition. We never quite understood the concept of too much capacity…we don’t think the supply of seats is more than the demand on many routes. Airlines frequently adjust schedules to better tune that.