Unrequited Airline Love

AirTran, Continental, Delta, Mergers/Finance, Midwest Airlines, United, US Airways

heartsOf course all of this news would just happen to drop on a very busy day. I’ve been wanting to write about it all morning, but I’m just getting some time now.

So, what news, you ask? Well, I’d argue that it’s not much news at all. The news is more about what people are discussing as opposed to something actually happening in the world. It goes to show that people do loooooove talking about the airlines.

It appears that the long-awaited consolidation in this industry is starting to take shape. No, nobody has bought anyone, but it has been confirmed that talks are taking place on at least three levels.

1) US Airways and Delta – There’s really not much to say about this one. You know the story, and nothing new has happened, but since numbers 2 and 3 are new, this one will undoubtedly be mentioned time and time again in the news. US Airways still wants to buy Delta, and Delta doesn’t like it.

2) United and Continental – The word is out now that Continental and United have had preliminary talks. Oooh, shocker of shockers. Rumors have been swirling on this one for months, so now we just have confirmation. Has anything happened? Nope. They’re just talking right now. Will anything happen? Who knows. But they should be talking now. Everybody should be talking to everyone as far as I’m concerned.

3) AirTran and Midwest – This one sort of came as a surprise to me, but I don’t think we’re going to actually see it happen anyway. AirTran made a bid in October to buy Midwest Airlines outright, and last week, Midwest’s board rejected the offer. So today, AirTran came out with a public appeal saying they still want to do the deal. Midwest came out in that oh-so-friendly Wisconsin way and said, “We think you’re great, but no thanks.” You would think that pretty much ends it here. I’m told that Wisconsin law makes hostile takeovers pretty difficult if not impossible, so this seems to be dead in the water. (Let me know if you have any details on this.)

That means so far we have . . . absolutely nothing! Yes, Qantas was bought today, but that wasn’t by another airline. It’s just a change in ownership and not a consolidation now. So why is everyone talking about this?

Probably because people love speculating about airlines. CNN, for example, has brought out an article saying that mergers will lead to higher fares. Well duh. Airlines want to merge right now so they can help improve their health. Despite what some people will tell you, the industry is not healthy overall. Sure, we’re in a high point right now so everyone is happy, but it won’t always be this way. This is how people sounded in the late 90’s just before the bubble burst.

Well, fewer carriers would probably lead to higher fares, but that would also mean the airlines could hopefully avoid bankruptcy next time around and people would be able to keep their jobs and even their wage levels. I know it’s crazy talk, but it’s really the way it should be. People in this country have had access to fares that have been far too low over the past five years and only now are they at a respectable level. (Notice how that neatly ties with profitability.)

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