What would another airline mega-merger mean for consumers?

April 08, 2010
Fares from Washington DC:

    Don't push the panic button quite yet.

    In the short term, it doesn't take an M.B.A. to figure out that fares would rise should United and US Airways merge. But the longer term outlook is cloudier. It's actually quite easy for a group of entrepreneurs to start a new airline (much easier, say, than to start a new oil company or computer manufacturer). There are a lot of planes sitting in the Mohave waiting for someone to snap them up at bargain prices, and, in the past, airline founders who cashed out while the going was good have become multi-millionaires (it was subsequent investors who were left holding the bag). So there's money to be made in them thar skies.

    So if only a handful of major U.S. carriers survived (United, Delta, American, Continental, Southwest plus the smaller players such as JetBlue/AirTran/Frontier/Alaska)  it would be tempting for some future David Neeleman to start another JetBlue, and that would put downward pressure on airfares, at least temporarily.

    So neither regulators nor consumers should necessarily panic at today's news in the New York Times about the off again on again courtship of US and UA.

    What could be more worrisome if a US/UA wedding resulted in a stampede of other mergers, as smaller carriers panic about ending up too small to survive. JetBlue and American? Alaska/Frontier/AirTran? Southwest and ? .... Probably won't happen anytime soon, but the airline industry is anything but predictable.

    Comments