Terror at Ten Feet
Whenever I see the corporate logo of Northwest Airlines (NWA), I always think of a band that came straight outta Compton all those many years ago.
Anyhoo, NWA and Delta are in merger talks to become the world's biggest, and certainly worst in terms of service and pricing, airline (as it is, they both suck pretty hard right now). The pilots at both joints are lukewarm-to-cold on the deal and various congress critters have spoken out against the deal. Neither will be able to put the kibosh on things, though they can make the eventual outcome more difficult and costly.
A snippet from one article:
"It's not an industry that works," said Mark Cooper, director of research for the Consumer Federation of America, who lobbied Congress against a bid by US Airways for Delta last year.
"We're now getting to the point where there are so few carriers left, and they still can't make money," he said yesterday.
Delta and Northwest said they have no current plans to cut more U.S. flights beyond what they have disclosed separately -- something analysts see as limiting the cost savings or higher fares the airlines could reap from the deal. The carriers also don't plan to close any of their hubs. But they didn't rule out further capacity cuts in the future if fuel prices continue to rise….
The executives said they would like to close the deal by the end of this year, which would be before the merger-friendly Bush administration leaves office.
Several lawmakers already have railed against a Northwest-Delta combination, arguing that the deal will decrease competition and lead to higher fares. But Congress has little power to stop a transaction, and most experts believe the Justice Department will approve it.
I like mergers and I don't fear bigger companies that result from them, even if mergers typically fail when it comes most measures of success. Airline deregulation in terms of pricing of tickets has been an absolutely great thing, though it was never extended to airports and air traffic control, which creates all sorts of problems. The troubles with the airline industry are due to a lack of free markets (including the prohibition on foreign ownership of "domestic" carriers), not their presence. Bailed out after the 9/11 attacks, expect the ailing airline industry to keep going back for more at the government teat on a regular basis. The airline industry is one of the worst when it comes to pushing "free markets" when it benefits them, then crying for government protection/intervention when that will help them out.
Tell your tales of Shatnerian "Nightmares at 20,000 Feet"—or, much more likely, on the tarmac or in the terminal—here.
And go Braniff!
Update: Skip Oliva notes via email, "The other problem that you did not state is that antitrust regulation prohibits most temporary alliances—aka "cartels"—that might make more economic sense than outright mergers.
