Flight Paths of Airlines Merging

Someday very soon, there may be fewer airlines listed on airport arrival and departure screens.<


The most recent large merger took place last year, when America West Airlines combined with the US Airways. The new US Airways faces challenges, including integrating different reservation technologies and resolving labor issues, but the rejuvenated carrier has quickly begun outperforming many of its peers financially.

The merger was made easier because US Airways was on financial life support. It was in the midst of its second bankruptcy in three years, had given up planes, cut pay and benefits and jettisoned its pension plans. Many industry analysts predicted liquidation was likely.

US Airways Chief Executive Douglas Parker said he believes there are financial opportunities by combining with a carrier going through financial reorganization.

"Mergers can create a lot of value," he said. "We clearly demonstrated that putting two companies together can create value."

United Chief Executive Glenn Tilton has called repeatedly for mergers of another type. Tilton wants Congress to reduce restrictions on foreign ownership of U.S. carriers, opening the path for airlines that are international in ownership as well as operation.

During a speech this month at the Chicagoland Chamber of Commerce, Tilton said that "restrictions, including limits on open access to foreign markets and cross-border investment opportunities, prohibit us from taking full advantage of international opportunities and to spread our business risk."

Such combinations have happened. In 2004, Air France took over KLM, the Netherlands national airline. The next year, Lufthansa took over Swiss International Airlines.

Merger talk has gained ground because many analysts believe there are too many carriers vying for travelers' business.

"If one major airline were to disappear, all this talk of mergers would damp down quite a bit," said Northwestern's Gellman.

And a merger wouldn't ensure the surviving carrier's viability, he said.

"Bad management drives out good in mergers," he said. "There are exceptions, but usually the worst managers stay on because their alternatives are less."



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