Topic Author
Posts: 894
Joined: Thu Jun 03, 1999 12:38 pm

Consolidation -- Does It Live Up To The Hype?

Tue Sep 30, 2003 10:26 am

The common (or, more correctly, a common) perception in the industry is that consolidation makes sense in the long term. The talk of a KLM-AF merger no doubt will prompt a lot of soul-searching among enthusiasts, analysts, and insiders alike.

But, for different reasons, I can't think of a single high-profile merger in the last 10 years that has yielded a positive result: that has benefited customers, satisfied employees, and improved earnings significantly. Ask any former TWAers about the AA/TW merger, and I'm sure you'll find that it didn't satisfy the second condition. The Swissair fiasco is a testament to the dangers of over-complicated consolidation. The US/UA merger failed when US (prompted by the DoJ) had second thoughts; the QF/NZ merger was barred by regulatory authorities; and regulators worldwide have openly said they oppose industry consolidation as a panacea for all that ails the industry. To all those who favor consolidation, I say: Prove them wrong. Have there really been any successful high-profile consolidations in the last decade?
Posts: 2410
Joined: Fri Feb 08, 2002 10:22 am

RE: Consolidation -- Does It Live Up To The Hype?

Tue Sep 30, 2003 10:37 am

Well, one might say that the merger between high-profile ValueJet and low-profile AirTran has borne out positively...

Part of the problem with high-profile mergers of the last ten years are a) there haven't been that many proposed transactions, let alone completed ones, and b) most of them have been to kill of competition, a-la AA-TW, not increase overall market presence.

I think the single most successful acquisition by any carrier of the last ten years was the buyout of Comair by its structural partner Delta. Delta was already the majority shareholder, but Delta later bought the company in its entirety. It permanently solidified Comair as a Delta partner, which is important for its CVG operation, but did little else.

I'm not saying consolidation is necessarily bad, I'm just saying that I don't see a lot of the recent mergers as positives. Maybe if 9/11 hadn't happened, the AA-TW merger would stand out as a successful merger, and perhaps US-UA would have happened, but who knows anymore? I do think that some companies could potentially consolidate, for example F9-B6 might work out, but nothing like an US-UA or NW-CO...

Those who fail to learn history are doomed to repeat it in summer school.