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Full speed ahead for US airline mergers
Whatever happens to the rumored Delta-United merger, similar activity is in the air in the near future for other US carriers, according to various sources.
“Cruse oil prices are climbing dangerously toward $100 a barrel. The US economy is slowing. Airline stocks are sinking. And labor costs are soaring,” says MSNBC.
The result is that as the airlines start to emerge from bankruptcy and post their best profits since 2001, the industry’s future becomes shaky.
Consolidations? Only a question of why and how.
“That’s a recipe for restructuring in the industry,’’ said Vaughn Cordle, CEO of Airline Forecasts in Washington. “There are just too many airlines right now. If the jet-fuel prices hold, something else will have to give.”
Industry analysts say that means more mergers and higher air fares.
Published reports last week that centered on a possible merger of United and Delta to create the world’s largest airline. But that was just a hint of what the future may hold, even if that alliance never happens.
There’s speculation that some airlines might try to rush into merger talks before a new administration in Washington takes over.
But some major carriers appear unwilling to take on the headache of risky mergers. That would mean months of difficult strategic planning. It would also include reviews by the US Justice Department that can take up to two years.
Goldman Sachs analyst Robert Barry wrote that “all airline management teams and boards have been discussing consolidation ad nauseam, for months if not longer.”
Report by David Wilkening
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