Topic Author
Posts: 1534
Joined: Thu May 20, 1999 3:49 am


Thu Jan 11, 2001 3:36 am

If all these mergers will go ahead and leave us with only a couple of major airlines here in the US, do you think that congress will allow, or will this pave the way for foreign ownership of airlines?

As we all may recall Branson wanted to start an airline here in the US however he couldnt do so due to some cap in foreign ownership. Do you think this will be one of the solutions to politicians answer to increase competition or to have a more consumer friendly environment?


RE: Mergers

Thu Jan 11, 2001 3:50 am

The likely consequence if these suggested mergers go ahead, is less competition, thus in theory higher prices. However, as the US has more of a capitalist economy, perhaps new airlines will be allowed to enter the ever growing US market more easily, thereby increasing competition, which should lead to lower airfares.
Matt D
Posts: 8907
Joined: Fri Nov 19, 1999 6:00 am

RE: Mergers

Thu Jan 11, 2001 4:00 am

Even though, in the wake of the proposed UA/US and now the AA/TW mergers, this topic has been discussed to death, let me just interject my $.02 for your own amuzement.

First of all, let me just say that there are no clear cut easy answers to this problem. If there were, then there wouldn't be so much interest in it.
Anytime you deal with mergers on this scale that could lead to an oligopolistic market in such a key area, there are a number of things you have to look at.
First, of course, is the obvious: will the mergers benefit consumers as promised? Very rarely has that been the case. We all know that the real reason behind mergers and takeovers is for the stockholders to be able to fluff their pockets by reducing service and increasing prices on the open market as well as putting X number of people out of work.
I have never, and I emphatically repeat NEVER seen a merger in ANY business where this didn't happen. (By the way, this topic could also be extended to include a vast range of other areas such as bank mergers, supermarket, entertainment mergers, and so on).
But on the other hand, is it really in our best interests to have the government stepping in and telling the Market who can merge and who cannot? Is that really free enterprise capitalism vis a vis Laissez-Faire? Or does that hint at Communism? The government sticks its nose in too much already. Do we want it extending more?
Even if the UA/US, AA/TW mergers go through, in the short term, it might be bad because they will get a virtual lock on gates, user slots, small to mid size markets and so on. Yet in one of the many anomolies in the airline world, it's those very burdens that allowed such airlines as Southwest and later Valujet (before its own incompetence allowed it to commit suicide) to grow and prosper. Airlines that reach critical mass like that cannot sustain themselves for any length of time. The cost structures are simply not conducive to a consumer friendly environment. One of two things is going to happen, both will ultimately lead to the consumers benefit:
With a lock on the market, the airlines will be able to get away with noxious price gouging. For a little while. Then people will no longer be able to afford to fly. So what does Big Air do? They lose market and earnings. They have two choices, neither very appealing: They could either slash fares, or abandon or reduce the market.
If they choose the former, their cost structures will not permit them to keep fares down for long. Sure traffic may be up, but yields will still be down: Boom-the consumer comes out ahead. If they choose the latter, Boom: a market has just been created, because now all the gate and user slots will be open. Someone will come along and set up another JetBlue or Valujet. Boom: the consumer comes out on top again because once again we have a low cost, new entrant player.
If you look back on the airline trends from 1985-1992, this is exactly what happened. If history is set to repeat itself, (which it always does because humans are shortsighted and never learn from their mistakes) then we are right at the beginniing of "takeover fever" from 1986 all over again.
So, in a sense, we are in for some rough times for the next few years. But people never change. Business cycles come and go. And in 10 years time, we will have seen this whole cycle taken place yet again.
Like I said, there are no easy answers. What I said is only speculation based on past history. I think it's fascinating to ponder over what the possible outcomes are. But the bottom line is this:
Do you want a free market economy or a Government ran one? Just remember the days of regulation.....and the days of deregulation. We can have one or the other. To try and have it both ways is a very risky and dangerous proposition.
Take your pick.
Posts: 5314
Joined: Mon Oct 18, 1999 3:09 am

RE: Mergers

Thu Jan 11, 2001 11:13 am

I don't like the idea of a foreign owned airline operating in the skies of the USA, they can do it in Canada, but not the USA. These mergers will have fares go higher, but airlines like Jetblue,AirTran,National,ATA,SunCountry,Midwest Express(pretty much all the low fare carriers) will have cheaper prices and there for will attract more pax because their prices are so much lower than the big guys, and that is a tough market to compete in, and I don't think a foreign owned airline would do well in the US domestic skies(nor do I want them to).
Give me a break, I created this username when I was a kid...

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