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US Consolidation done differently

Fri Oct 13, 2017 10:55 am

The consolidation of the US airlines had a transformational impact on the profitability of the industry. Bringing 6 legacy carriers down to 3.

Many times since these mergers I have wondered what it would have been like if it would have been done differently. What if US Airways' 2006 bid for Delta materialised? What if US Airways and United ended up merging? How about a Delta Continental merger?

What other mergers could we have seen and what would be the results of that? What airline combinations would have had the best/worst route network? Would any airline combinations resulted in other cities being dehubbed? Who would have been the most/least profitable? Could Cleveland or Memphis have been saved? Could we have had an alliance without a US airline?

Many of you may include the America West-US Airways merger in what you see as the consolidation period but for the purpose of the post I am mainly thinking about the NW-DL, CO-UA, US-AA mergers.

My apologies if there is already another thread asking a similar thing.
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Re: US Consolidation done differently

Fri Oct 13, 2017 12:39 pm

There have been similar threads but its been a while. In my opinion, a United-Delta merger would have been the most dominant combination of the US6 that could have been approved. CVG would be roughly where it is today due to ORD and SLC would likely have been reduced in favour of DEN, but still would have maintained a presence due to the continuous growth of the SLC area. Internationally, there could not have been a more dominant combination. For that reason, its possible this combo never would have happened. UA-AA never would have been approved due to a near monopoly at ORD. NW-AA would have made an excellent combination as well as it would have given NW a major west coast hub it never had in LAX and made AA the dominant carrier in the Midwest. It would have been especially interesting to see what would have happened with KLM, as BA has in the past stated it should have tied up with KLM instead of IB as AMS would have effectively been LHR's third runway. NW-US would have been an extremely complimentary merger with aircraft commonalities and hubs, likely not having to close hubs although I think MEM was doomed regardless of whomever NW decided to tie up with. Also, branding would have been an issue and lack of an Asia hub although SEA was inevitably going to be it due to the 787 order and how well the 787-8 would have translated to much of SEA-Asia. The 787-8/A350-900 combo would have replaced the 747s, which had this merger occurred, probably be already retired by now. CO-US would have made the surviving carrier, probably CO, a strong competitor to DL in the SE, but would still would have lacked West Coast-Asia. Also, PHL would have been greatly scaled back to the point where it would just function as O&D traffic, so similar to DL's position at CVG, but larger due to the PHL population area. But yeah, PHL would have ceased to have been a connecting hub. DL-CO would not have happened due to lack of Asia flying that Delta so desperately needed and the combined carrier would have had to greatly scale back JFK flying to be approved, something Delta would have not sign up for. DL-AA also lacks Asia flying although it would have absolutely lethal domestically. AA-CO, yeah never had a chance, ditto AA-UA and UA-NW. As for US-DL, due to the significant network overlap, I doubt it would have been approved. DL employees were never in favour of it neither was anyone else except for Doug Parker and Co. UA-US has been discussed ad nauseam and the same problems that would have affected the combined carrier in 2000, where the same when merger discussions happened in 2010. A
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Re: US Consolidation done differently

Fri Oct 13, 2017 12:55 pm

Here is what probably would have happened if UA had merged with US, if DL merged with CO, and if AA had merged with NW:
  • AA would have acquired a hub at MSP if an AA-NW merger had happened, and the MSP hub would likely have been kept as an AA hub if AA had merged with NW
  • The MEM and DTW hubs would have undergone significant downsizing if AA and NW had merged
  • MEM might possibly have survived as a AA focus city (but not as a major AA hub) if AA had merged with NW
  • The EWR hub would be have been significantly downsized if DL and CO had merged since DL already had a hub at JFK with nonstop service to international destinations from JFK at the time, since DL already had nonstop service from LGA to non-DL hub markets in the Southeastern U.S. at the time, and since DL already had nonstop service from LGA to 3 cities in the eastern part of the Midwest (Chicago, Cincinnati, and Columbus) at the time
  • CLE would likely have been dehubbed if DL had merged with CO since CLE is near DL's CVG hub
  • DL would have acquired CO's former hub at IAH had DL merged with CO, and DL would have kept the IAH hub since DL had already dehubbed DFW prior to any possible merger between DL and CO ever taking place
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Re: US Consolidation done differently

Fri Oct 13, 2017 1:48 pm

US-NW is interesting. This two combined with AS to feed a potential SEA gateway would have been fascinating (although I admit the current situation for both is better)

I think that no matter how much we discuss all this, though, the mergers all worked out well for all parties involved. Except Memphis. :D
-Andrés Juánez
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Re: US Consolidation done differently

Fri Oct 13, 2017 2:02 pm

Or maybe all six airlines could have practiced real capacity discipline as they do NOW, instead of giving it lip service. No need for mergers. But I digress, please carry on.
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Re: US Consolidation done differently

Fri Oct 13, 2017 2:06 pm

There are investment bankers who sit around in mental circle-jerks all day imagining business combinations (spin offs, IPOs, mergers) that will generate $millions in fees for just a few thousand man-hours of work. Even they, though, need to pay attention to realities: deals need to be at least remotely plausible to attract investors, and deals generally need to get done to generate payment.

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