Another Boyd comment on Mergers

[General Lee]

But Michael Boyd, president of Boyd Group, an aviation consulting company in Evergreen, Colo., objected.

"It doesn't make any sense," he said. "It's bad for the consumer because it means fewer low-cost seats will be available, and places like Charlottesville [Va.] and Norfolk, Va., or Montgomery, Ala., will be dominated by a single airline. But offering fewer seats at higher cost is Economics 101. The proposed deal will be good for American Airlines and Continental Airlines (nyse: CAL - news - people ) because if it goes through, Delta will be rolling in the mud for two years trying to put it together. I've heard all the talk about 'synergies,' but the maintenance and operational considerations are immense--there is no fit.""


Bye Bye--General Lee

 

[RIDETHELIGHTING]

So what if ticket prices go up, there way to cheap now.

 

[On Your Six]

But Michael Boyd, president of Boyd Group, an aviation consulting company in Evergreen, Colo., objected.

"It doesn't make any sense," he said. "It's bad for the consumer because it means fewer low-cost seats will be available, and places like Charlottesville [Va.] and Norfolk, Va., or Montgomery, Ala., will be dominated by a single airline. But offering fewer seats at higher cost is Economics 101. The proposed deal will be good for American Airlines and Continental Airlines (nyse: CAL - news - people ) because if it goes through, Delta will be rolling in the mud for two years trying to put it together. I've heard all the talk about 'synergies,' but the maintenance and operational considerations are immense--there is no fit.""


Bye Bye--General Lee

I agree with Boyd half the time. However this time I COMPLETELY AGREE with him. Parker can't even integrate what's on his plate right now... Should be interesting to watch.

 

[Fearless Tower]

So what if ticket prices go up, there way to cheap now.

The problem is the mechanism that will drive ticket prices up: US Airways takes over Delta and cuts capacity.....fewer seats drives ticket prices up. Great for management and shareholders.....pretty much sucks if you are a pilot or FA or any other employees of the new monster airline and don't have enough seniority to avoid the inevitible furlough when they start parking the planes in the desert. IF you think that a rise in ticket prices is going to be transferred into a rise in pilot salaries, you're fooling yourself.

.....and that's IF the monster is able to pull it off.

I seriously doubt that they will be successful since other LCC's like SWA and Jetblue will jump all over the drop in capacity and keep the fares down. Communities like Norfolk, VA where SWA already has a foothold will do just fine.

The most likely result of such a merger is EVERYBODY loses with the exception of the few that cash their chips out at the right time.

 

[YourPilotFriend]

Actually, the affect on the regional network will drive filled seats up and increase revenue. The LCC's still control pricing power, so the fare cost structure is still completely up to SWA. SWA sets the price on all of the routes it flies, no matter which airline.

 

[Flopgut]

This is supposed to be a free and de-regulated market, let mergers happen! Airlines should be allowed to merge anyway they choose and fly anywhere they choose, or choose NOT to. Why is loss of service/competition to most small markets the legacy airlines’ problem? Why does DOJ keep pulling this stunt? Why do we keep putting up with it? SWA only flies to 62 cities, look at what they did to PIT. There are cities in third world countries without full time electricity that have more comprehensive air service than PIT! DOJ ought to look closely at what the other effects of LCC is on the overall airline system. Especially if they are going to use convenience and variety of airline services in Montgomery, AL and Charlottesville, VA as criteria for whether or not to let a legacy airline be involved in a merger. It’s pure crap! Why don’t they force SWA to go to those places? To do just that would show no less a blatant disregard to a free marketplace and fair interstate commerce than to prohibit a legacy involved business transaction for want of the same airline service!
We need a national air transportation policy, stat! Here is what’s at stake: DOJ may not approve mergers that involve whole airlines. It is possible that DAL and NWA (or any legacy airline) would be broken up to facilitate consolidation. US legacy airlines, instead of appreciation, respect and regard for the corporate entities and employees, could be carved up for being too large to merge. Sad. Complete betrayal of a free market, saved exclusively for legacy airlines and their employees.

 

[Draginass]

Dougie might pull a Carty . . . . buy an airline for billions, then shut it down.

 

[CaptJax]

Losers In Airline Deals: Passengers

Updated:2006-11-15 20:50:59
HERB GREENBERG: Losers In Airline Deals: Passengers
By Herb Greenberg
Dow Jones
SAN DIEGO (Dow Jones) -- Suddenly I'm thrilled that my frequent-flier miles are on United's aging and somewhat rickety fleet, even if it doesn't mean much in the way of nonstops from San Diego to the New York area.

At least it's not merging with anybody. At least not yet.

That's pretty much what I was thinking this morning when I saw that U.S. Airways Group Inc. (LCC) was bidding for bankrupt Delta Air Lines Inc. (DALRQ) . While such a deal might be wonderful for the airline industry, it's terrible news for those of us who frequent these flying buses.

The idea behind mergers, like the one proposed Wednesday, is to further reduce capacity and costs. That's another way of saying that there will be no empty middle seats.

I like to fly and understand the industry's need to do whatever it takes to survive. It wasn't an easy business to be a part of under regulation. As foes of deregulation in the late 1970s predicted, it wouldn't be any easier as airlines battled one another in a free market.

They were right -- and the mergers that followed have proved it.

One of the first mergers in the deregulated skies, which I covered in my days as a reporter at the St. Paul Pioneer Press, was St. Paul-based North Central's acquisition in 1979 of Atlanta-based Southern Airways. The new company was called Republic Airlines. Talk about culture shock! A year later Republic went on to acquire Hughes Airwest. Six years later Northwest (NWACQ) , also of St. Paul, acquired Republic. A few years later Northwest was acquired in a botched leveraged buyout. Northwest, long-ago dubbed "Northworst" by captive passengers in the Minneapolis-St. Paul area, appears to have been struggling ever since.

Now we have U.S. Airways, fresh from a year-ago merger with America West, trying to take over yet another struggling airline before its own house is in order.

One of the biggest issues is labor. Several weeks ago the Airline Pilots Association issued a press release demanding that U.S. Airways CEO Doug Parker " end his obstructive negotiating tactics in his attempt to sidestep the integration of the two airlines." One pilot was recently quoted in the airline's home paper, the Arizona Republic, as saying, "If they are not careful, they're going to mess up a good thing. I think we're getting close to the end of the honeymoon period."

According to the story, the situation isn't much better for passengers. "The biggest snafu occurred in the spring," the story said, "when the airlines merged their frequent-flier programs and [Web sites]. Passengers found glitches galore, like being unable to book a flight or look up account information."

And I won't even bore you with the newspaper reporting on the fiasco that's come of merging the two airlines' computer reservations systems -- something that won't be fixed until March at the earliest. "It's a big problem," Parker, the chief executive, was quoted as saying. "I'd be upset, too."

And he wants to buy Delta? Good thing for its passengers Delta is fighting back. But, sadly, this is likely just Round 1.

Suddenly that tired old United (UAUA) fleet is looking mighty good.

(END) Dow Jones Newswires 11-15-062041ET Copyright (c) 2006 Dow Jones & Company, Inc.