It's gotten worse...
Less competition means less incentive to go the extra mile, less reason to reduce prices.
This is not proven. There are a lot of different sides to consolidations and mergers. Some are positive for the customer, some are not so positive. To only stress the negative aspects is sad. I am a complete optimist, and I cant stand the negativity some people express.
But, to please the far majority of A.net viewers, let me start with the negative aspects to mergers:
The negative sides:
This means that airlines, or any other commercial firm for that matter, have no need to stand apart from the crowd of competitors. The incentive to be special for the customer (outstanding service, low prices, great network) is gone, because the customer doesn't have a choice anymore. This could
lead to less service, higher prices and less possibilities for customers (a decrease in the amount of products offered)
Drain towards other markets
If a certain market cannot fullfill the wishes of its customers, they will move their interest, and, their money. In this example, the Dutch traveller market could switch from flying out of AMS
to, per example, flying out of DUS
. This could lead to a decline in traffic at AMS
, which could lead to lower employment and an empty airport.
Competitive (comparable) products
If a company supplying a certain product cannot meet the demands of the customer (acceptable service, reasonable prices), the customer will switch to another product. In this instance, that would be the highspeed train or the car for Intra European travels. So the posibility of raising your price is not without a boundary. It will all have to be within al reason.
The positive side:
In a time of economic downfall, like the period we are in at the moment (especially for aviation) competition can destroy the entire bussiness. The extreme low number of passengers is split up between a lot of different carriers, making the number of profitable pax for each airline even lower. This will kill not only 1, but both airlines.
So even though it may look like KLM is committing suicide, they are actually saving their asses by joining an important competitor; AF
. That way they form an important player in the industry with a lot of reserves and capital to back them up. This way the merger can even be of use to the customer. With the combined income on high yield routes, this new airline can start offering routes that are not profitable and were not an option when the airlines were still seperated.
I personally dont see this happening. There is one thing you must thoroughly realise. A brand is the most expensive thing for a company, airline or sodadrink, it doesnt matter. Hundreds of millions of dollars are spent in the Netherlands ALONE on marketingcommunication and the positioning of brandnames in the market. Of all brands in the European market, KLM is among the very best and well known brands. They have a good reputation and people will always recognise a blue airplane as being a good, safe airplane, just because they associate it with KLM.
Even though it may seem like AF
is planning to "destroy" KLM (I personally like to use the term "assimilate"), this will not happen. AF
is not foolish enough to dump one of the strongest brandnames in the world in order to make their fleet larger. This will not lead to increased income compared to the situation where the KLM brand is being retained. So even if the French want to get KLM out of the market, they will not do so if they are smart. Profit-wise, it does not matter if the planes are all white, or a mixture of white and blue.
This all being said, the rational way of dealing with this is to start up a new airline, one that will be the result of completely blending AF
and KLM together. A new paintscheme and a name is needed. This will have to be brought out to the customer in huge campaigns that stress the need for this merger and the advantages it can offer the customers. The first years (5-8 years) the colors and service should remain the same. After that, the first planes can start appearing in the new colors.
It is offcourse more complex than this, but this is the wider picture some fail to see.
btw, no armchair economist here.. I actually study this stuff at my Uni