If United and Continental merge, what then?

April 24, 2010
Fares from Washington DC:

    The NY Times and Wall St. Journal and other media outlets are reporting that Continental and United have become more serious about a merger, now that the US Airways/United talks have ended. So would yet another mega merger result in higher airfares?

    The stock market seems to think so. Had you you invested your nest egg in Delta Airlines' stock at its 52 week low, right now you'd be three times richer.

    And if CO/UA merge, doesn't that mean that American, which would suddenly become just the third largest US carrier, would want to find a partner as well, perhaps in US Airways or, who knows, JetBlue?

    So imagine a world with United, Delta, American and Southwest as the main domestic airlines. We'd still have AirTran, which could move into markets that the majors might have to abandon owing to overlapping routes, plus JetBlue, Frontier/Midwest, and Alaska. (Oh, and tiny Virgin America.) That's still a lot of airlines, and airlines have been notorious for being incredibly competitive price-wise, often to their own detriment. Plus, it's really not all that hard to start a new airline, especially now that credit is beginning to thaw. There are plenty of planes in the Mohave waiting for a new home. So we could see another David Neeleman jump into the fray and create a new airline to give the majors some competition.