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Delta And Continental Merger

Mon Feb 12, 2001 12:54 pm

Personally, I think that the Delta/Continental merger would be a very bad idea. I know Delta is concerned about American buying out TWA and overpowering them. Delta should just stick it out. They have enough problems (Not saying I don't like the airline, It is my favorite overall, and I am hoping to work for Delta Technology based in Atlanta soon in the future) But they dont need to take on more weight with Continental. Continental, I really don't care for them, I flew them last summer, and was very displeased with service overall. I have heard about a possible Delta/TWA deal ?? I don't know very much about this, but there is even a post on this board about it. That i'm not shure about, because I don't know too much about TWA.
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Joined: Fri Apr 21, 2000 5:03 am

RE: Delta And Continental Merger

Tue Feb 13, 2001 12:18 am

There are several thread on the board about Delta merger possibilities, including one regarding TWA.

In short, you're correct that DL-CO would be a very bad idea. The industry wants to consolidate so they can destroy competition (meaning low fare carriers, which Big Air could do as Big Three) and have a comfy low-volume, high-margin fiefdom that would shut down the Deregulation Act once and for all. Competition and low fares are so icky, you know.

DOJ should throw all of the megamerger proposals into the Potomac and send the industry a clear message: Low fare carriers and a dynamic industry are reality. Deal with it.

Alpha 1
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Joined: Sat Feb 03, 2001 12:12 am

RE: Delta And Continental Merger

Tue Feb 13, 2001 1:19 am

DCA-ROC, what's your opinion on an established carrier lowering prices on a route to match that of a start-up carrier? A few years back, Kiwi went into the ATL-EWR market with tons of flights and a fare of like $49.00 each way-a fare, they admitted later, they knew they couldn't make a profit at. CO then matched the fare, and increased thier service in the market. Kiwi then cried fowl to the DOT and DOJ, saying CO's matching of fares and increasing service was "anti-competitive". They said CO deliberately lowered their fares to keep Kiwi from succeeding.

I look at it this way-Kiwi didn't have anything to bark about. They knew the fares were artifically low; they had to know that going into a big business market like EWR-ATL would prompt a response from CO or DL; they had to know that CO would respond to protect their market share. Yet many in the government say that what CO did was "anti-competitive".

We live in a capatilistic society-and that means the strongest survive-it's happened in every industry that has ever appeared in this country. If a start-up can make it, so be it, but it has to be able to withstand competition.
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RE: Delta And Continental Merger

Tue Feb 13, 2001 1:47 am

The mainline carrier's response to a low-fare entrant should be competitive but not predatory. First, is the mainline carrier matching fares or deeply undercutting? Second, are they adding vast amounts of seat capacity to a route that has not supported the new amount of seat capacity in previous years?

Introductory fares often aren't profitable, so CO's matching a Kiwi introductory fare of $49 isn't predatory on its own. You say that Kiwi added "lots" of seat capacity on the market, I don't know what that means. If they offered an amount of capacity similar to what Continental was offering on EWR-ATL, and CO suddenly say doubled its seat capacity in response, yes I'd say CO's action was predatory.

But if CO edged up its capacity a little--say one or two additional daily flights with similarly-sized a/c on a route that previously had eight or nine daily flights--that's probably not predatory. The total seat capacity addition is the measure of what's competitive and what's predatory.

Also, did Kiwi continue to charge unprofitably low fares after the introductory period ended? Managers of a well-run business know what prices will make a profit and what won't, and they can't expect the government to protect them in running an unprofitable business. Are you saying that Kiwi continued to charge below their cost as a regular procedure of business? If so, they should have gone out of business on their own, regardless of DOJ, CO, or DL action. Which eventually they did--whether as a result of the ATL route or not I don't know.

So my answer is I don't know--it depends upon the particulars of the case. Low-fare carriers have to have good capitalization, a good business plan, and good yield management like anybody else. They can't expect DOJ to protect them from their own bad management. But they can and should expect DOJ to protect them from big guys dumping capacity and deeply undercutting them for a long period of time to destroy them.


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Joined: Fri Apr 21, 2000 5:03 am

RE: Delta And Continental Merger

Tue Feb 13, 2001 1:54 am

"Kiwi then cried fowl to the DOT and DOJ...."

I don't mean to bird-dog you, Alpha1, but that sounds pretty punny to me.

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Joined: Fri Sep 08, 2000 12:15 am

RE: Delta And Continental Merger

Tue Feb 13, 2001 7:20 am

I heard from a couple of friends in ATL that the intracompany teletype printers at DL were humming with pass authorizations for CO senior management who were in town....In regards to DL and TWA, I just got back from a few days in STL and looked at TWA's operations there. In a few words, their operation looked very low rent. The gate backdrops, carpeting and attitudes of TWA workers combined for a depressing scene. There were several stranded TWA pax that were on a flight that had a mtc delay for 45 mins, then an ATC resequencing which resulted in a further 1:20 delay. They all misconnected and TWA didn't offer to put them up overnight. There was a lot of trash talkin coming from their mouths to say the very least. I don't think that TWA has anything to offer DL. As for a DL/CO hookup and how to buyoff NWA? How about a truckload of cash and all of CO route rights from EWR? Or a combination of the EWR-Europe route authorities and CO Micronesia? NWA is bribable if NWA is assured the opportunity to grow itself into major contention status, post merger mayhem. My own personal hope is that DL focuses on itself by reestablishing positive employee realtionships, and improving its service. DL can then grow itself at a rate of 4-6% a year by operating new domestic flights and international services on larger aircraft.

RE: Delta And Continental Merger

Tue Feb 13, 2001 7:12 pm

DCA-ROCguy: Although he doesn't say the airline, but did you know that Alpha 1 is an airline employee based in Cleveland?

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