Much Ado About Airline Mergers ...

… or, what keeps airport directors awake at night.   Just a few short months ago, U.S. airline industry analysts were confident that mergers were not in the immediate offing. In fact, it seemed the only airline exec talking mergers was United’s Glenn Tilton. Now, there’s a hostile bid by US Airways for Delta; United and Continental appear to be courting; and, AirTran has its eye on Midwest.   Generally lost in these discussions in the media is the potential impact on local communities and their airports. One scenario is that such mergers open up opportunities for low-fare carriers – bringing the ‘Southwest effect’ is an attractive lure for communities. Or, route duplications by merged carriers can mean less access for a community. And, in the worst-case scenario, a community can lose service altogether as the merged carriers restructure their routes.   Airports, most notably through the Airports Council International – North America, have been lobbying Washington for more financial freedom in how they operate their facilities. They would like to be able to react to local market forces, and to get a better handle on how their airports are built and maintained with more freedom with passenger facility charges, which have served as a catalyst for so many airport developments in the last 15 years.   In the December 18 Wall Street Journal, former American CEO Robert Crandall and Clifford Winston, both senior fellows with the Brookings Institution, suggest that a primary reason airlines merge is to tap international routes. They call for Congress to free up foreign investment in U.S. airlines and to allow foreign carriers to serve domestic U.S. markets, thereby encouraging competition. Instead, Congress appears poised to interfere with any merger discussions. Crandall and Winston also call for the privatization of U.S. airports “thereby allowing them to compete aggressively for air carrier service.†Most U.S. airport directors would agree with the concept of freeing up their ability to compete, but not with the proposal of outright privatization.   There are reasons that airports have moved aggressively in the past two decades to have greater control over their facilities. The number one reason is the uncertainty of the airline business. It’s why common use systems and short-term airline/airport agreements are in vogue.   Thanks for reading. jfi