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global1
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Joined: Fri Dec 19, 2014 5:31 pm

Extreme consolidation scenarios

Sun Mar 29, 2020 12:36 pm

Let’s have some fun and discuss a scenario where the 4 major US players all come out of this smaller with some in acute distress, maybe chapter 11.

What was once ‘unthinkable’ may be looked at, i.e:

Delta/United merger. Carve outs could be DL at JFK/LGA to account for EWR and DTW for ORD. United would gain
ATL, a return to JFK, DL/VS Heathrow slots ( making them a formidable competitor to AA/BA), potentially hubs in AMS and CDG ,ICN,MEX,as well as possibly LATAM

Delta would get it’s west coast hub in SFO, a stronger presence in LAX, a killer transpac (throw in Virgin Australia), and a Texas hub.

What other combinations could come out of this?

OK fellow armchair CEO’s, let the games begin..
 
Ishrion
Posts: 2380
Joined: Mon Feb 04, 2019 6:17 am

Re: Extreme consolidation scenarios

Sun Mar 29, 2020 12:43 pm

Spirit, Alaska, and American should merge. Maybe throw in Frontier to compete against the "Delta/United" in Denver.

Might as well throw in Sun Country and Hawaiian Air.

Then, Qatar Airways should purchase a 49% stake in the new merged airline.
 
Toinou
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Joined: Sun Apr 14, 2019 8:21 am

Re: Extreme consolidation scenarios

Sun Mar 29, 2020 12:49 pm

What I am wondering in such a scenario is how it would be viewed by competition authorities.
 
MIflyer12
Posts: 7343
Joined: Mon Feb 18, 2013 11:58 pm

Re: Extreme consolidation scenarios

Sun Mar 29, 2020 12:51 pm

This is the kind of nonsense that caused airline merger approval to be moved out of the DOT and into the antitrust division of the Department of Justice decades ago. Try study instead of baseless dreaming.

https://www.ftc.gov/public-statements/2 ... ce-federal

It's the DOJ that shut down the UA/US merger of ~twenty years ago. https://nypost.com/2001/07/28/united-us-air-deal-kod/

It's the DOJ that demanded concessions to approve the AA/US merger.
 
global1
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Posts: 501
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Re: Extreme consolidation scenarios

Sun Mar 29, 2020 1:27 pm

It wasn’t that long ago that the DOJ forced Northwest to divest their stake in Continental because of concern that combination would be too large. Well, look at where we are today.

A scenario where we basically emerge with 3 airlines is unlikely, but not out of the realm of possibility.

Europe has basically 4 clusters: IAG/AFKLM/Lufthansa Group/RyanAir and EasyJet

China has Air China, China Eastern, and China Southern.

Both the EU and China have larger populations than the USA.
 
United1
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Joined: Wed Oct 08, 2003 9:21 am

Re: Extreme consolidation scenarios

Sun Mar 29, 2020 2:01 pm

Toinou wrote:
What I am wondering in such a scenario is how it would be viewed by competition authorities.


If the airlines were healthy and stable the mergers would never be approved....however these are interesting times we live in. There is something called a failing carrier exemption (I don’t think that’s exactly what it’s called) that allows another company to step in and acquire a collapsing competitor. It’s set up to help preserve jobs and be less disruptive to travelers.
I know the voices in my head aren't real but sometimes their ideas are just awesome!!!
 
global1
Topic Author
Posts: 501
Joined: Fri Dec 19, 2014 5:31 pm

Re: Extreme consolidation scenarios

Sun Mar 29, 2020 2:14 pm

DL+ UA
AA+B6+AS
HN+Spirit+Frontier+Hawaiian?
You would also have your Allegiants,Breeze, and others that may pop up.

Any other possible combinations?
 
PI4EVR
Posts: 92
Joined: Sat Jun 01, 2019 4:29 pm

Re: Extreme consolidation scenarios

Sun Mar 29, 2020 3:51 pm

DL & UA in *Alliance
AA, AS & HA in OneWorld
B6 & WN All one class WN-style & JFK ops only for NYC
F9 & NK ULCC
Allegiant low-cost vacation-niche market
Breeze.... whatever it creates by 2021
 
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PatrickZ80
Posts: 4158
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Re: Extreme consolidation scenarios

Sun Mar 29, 2020 3:52 pm

global1 wrote:
Europe has basically 4 clusters: IAG/AFKLM/Lufthansa Group/RyanAir and EasyJet

Both the EU and China have larger populations than the USA.


True, but the EU has a whole lot of smaller airlines outside these clusters (it's 5 clusters by the way, not 4). In fact, this cluster makes up for less than half of all air traffic within the EU.

That's not the case in the USA, where the number of airlines outside the major airlines is negligible. The USA is already far more consolidated than Europe.

In the USA there's very little to gain when it comes to mergers. Maybe some smaller airlines could be absorbed into the big ones (Alaska Airlines is already being absorbed by American), but I can't see any of the big ones merging with each other.

Neither can I see that happening in Europe, however in Europe there's a lot more to be absorbed into the major carriers. Within Star Alliance the Lufthansa group is by far the largest in Europe, but there's more. SAS, LOT, TAP and Aegean are also in Star Alliance. Imaging how big they would get if they all merged into the Lufthansa group. No other airline within any alliance can come close to that.

As for SkyTeam, the only serious candidate to be absorbed into Air France-KLM would be Alitalia, but given how loss-making Alitalia is I doubt they want to have it. Air Europa has already been bought by IAG to be integrated into Iberia. That leaves only CSA and Tarom as SkyTeam candidates for Air France-KLM, both are so little that they'd not really add anything valuable.

For IAG, the only European OneWorld airline that isn't yet part of IAG is Finnair. They could merge, but it would hardly strengthen them.

What about non-alliance airlines? Norwegian is in a very bad financial position, so either they're bought or they get bankrupt. Problem is, who wants to have Norwegian? Certainly not with all the debt they're carrying.

Wizzair is an interesting one, basically it's the third large LCC in Europe after Ryanair and EasyJet. Imagine what would happen if Wizzair and EasyJet merged? They'd instantly take over Ryanair to become the largest LCC in Europe.
 
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DarkSnowyNight
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Re: Extreme consolidation scenarios

Mon Mar 30, 2020 9:45 am

Hmmm... Uneltacan West operating the legacy route structure with JetHawlaska running the more traditional upscale LCC ops, and Sprontier rounding out the ULCC market. . .
"Nous ne sommes pas infectés. Il n'y a pas d'infection ici..."
 
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eta unknown
Posts: 2778
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Re: Extreme consolidation scenarios

Mon Mar 30, 2020 11:57 am

AA, DL, UA are each too large to merge with each other, so any combination is not possible, plus the number of job losses would be too high and would never get approved.
However, throw in a JB+F9+AS+HA combo and something like that might work.
 
global1
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Re: Extreme consolidation scenarios

Mon Mar 30, 2020 1:03 pm

DL/UA/AA may be ‘too large’ in their previous scope, yet all 3 expect to come out of Coronavirus as smaller carriers.

While still unlikely, changes to the industry could allow the once ‘unthinkable’ to be looked at.
 
global1
Topic Author
Posts: 501
Joined: Fri Dec 19, 2014 5:31 pm

Re: Extreme consolidation scenarios

Mon Mar 30, 2020 1:05 pm

DL/UA/AA may be ‘too large’ in their previous scope, yet all 3 expect to come out of Coronavirus as smaller carriers.

While still unlikely, changes to the industry could allow the once ‘unthinkable’ to be looked at.
 
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eta unknown
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Joined: Wed Jun 13, 2001 5:03 am

Re: Extreme consolidation scenarios

Mon Mar 30, 2020 6:40 pm

Eh even after their slim diet, the US3 are still too big to merge- I also imagine most of their competitors will be on diets too soon.
But I reiterate the job losses involved would kill anything requiring regulatory approval.
 
blockski
Posts: 684
Joined: Wed Jun 15, 2016 8:30 pm

Re: Extreme consolidation scenarios

Mon Mar 30, 2020 8:49 pm

global1 wrote:
DL/UA/AA may be ‘too large’ in their previous scope, yet all 3 expect to come out of Coronavirus as smaller carriers.

While still unlikely, changes to the industry could allow the once ‘unthinkable’ to be looked at.


If DL, UA, and AA each emerge as smaller carriers, it will be because the entire industry shrank - meaning they likely control the same market shares (if not more due to potential failures of smaller, niche carriers).

The reason the US3 are 'too large' to consolidate is because of their market share, not absolute size.
 
global1
Topic Author
Posts: 501
Joined: Fri Dec 19, 2014 5:31 pm

Re: Extreme consolidation scenarios

Mon Mar 30, 2020 9:14 pm

This recovery is going to take awhile. Even if Covid goes into dormancy with warmer weather, summer travel is going to be a wash. Advance bookings are light. No one is in the travel mindset right now. People have taken a big economic hit and many are concerned about their livelihoods.businesses are teleconferencing. The extent of the damage to the Industry is unprecedented and unknown.

Should things turn South and major airlines head for Chapter 11, takeovers/mergers could surface.

United/Delta have complementary strengths.
With the exception of the A350 and A330, fleets would be very similar. MD80/90’s at DL will be gone. 717’s are leased and could be returned to Boeing.

Carve out would have to occur in JFK and LGA but UA/DL would still have a significant presence at those airports

Hub rationalization would have to happen in the Midwest and Mountain states. Ord would come out on top and Den over SLC. Msp/Dtw/Slc/Lax/Sea/MIA (because of Latam) would be focus cities, as would Sea/Bos/Aus. Hubs could be returned Ewr/Ord/Atl/IAd/IAh/SFO

Pilot shortage problem solved and retirement packages and incentives could significantly reduce other work force groups. Management is more easily downsized.

Just food for thought.

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