Friday, February 15, 2008

Airline Merger (s) [Cont'd]

---More speculation on the United-Continental merger that is expected to follow quickly once a Delta-Northwest merger agreement is announced. One bit of encouraging speculation on the UA-CO deal: Continental's Larry Kellner, who succeeded Gordon Bethune as the head of the best-run domestic airline, would run the merged airline, says the Chicago Tribune.

---Given an executive branch accustomed to laughing at Congress while always getting its own way, I have my doubts about Congressional hurdles on the merger-dash track before the Bush gang leaves town in less than a year, but James L. Oberstar, chairman of the chairman of the House Committee on Transportation, weighs in on airline mergers nevertheless.

---Patrick Smith, the aviation online columnist, parrots the official industry line in Salon today: "The airline industry suffers chronically from oversupply -- that is, too many seats chasing too few passengers ..." That's one rationale you'll hear for mergers and consolidation: reducing the number of unsold seats.

(Nevertheless, Smith has some interesting insight on staffing, fleets and other merger matters).

One problem with the "too many seats ... too few passengers" mantra: For over a year, domestic airlines have been reporting load factors around 80 percent (a load factor is a measure of the number of available seats sold).

Load factors in the 75-80 percent average range mean most flights are totally full -- as anyone who's been flying in the back of the plane is well aware. And so far, passenger demand has kept growing, despite the huge fare hikes airlines have been sneaking in on selected routes.

At the same time, the major airlines (Southwest excepted) have been steadily reducing the number of seats available on domestic routes. United, for example, cut its domestic capacity by over 10 percent in January, compared with January 2007.

And as to fares, how about $1,200 roundtrip for a coach seat, Newark-Toronto in a regional jet, which was what I was confronted with last weekend when I had to fly to Toronto this week on short notice? Not to worry, though, as my flight, and the one after that, were canceled by bad weather. Back in December, an earlier attempt to reach Toronto from Tucson failed when my flight into Houston arrived too late for me to make the connection.


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