Merger Mania

It all started with US Airways’ offer to buy Delta.The potential combination of these two airlines would create the largest airline in the US with annual revenues of $25 billion dollars. The airline would have hubs in Philadelphia, Charlotte, Atlanta, Washington Reagan, Cincinnati, Salt Lake City, Phoenix, and Las Vegas. Wow!

Due to the incredible breadth and scope of this airline the other carriers who would most likely rather remain independent are looking at combining because they believe they have to be a certain size to be able to compete.

It has always been generally accepted wisdom in the airline industry that you have to have a very strong and persuasive route system in order to control passenger flows.The ability to carrier a passenger everywhere gives a carrier a certain advantage when they negotiate contracts with large corporate users, particularly when a carrier can give you a great deal of international destinations.As an example, a carrier like United Airlines is more likely to get a contract with a large local corporation when United can offer London or Paris as well as Des Moines or San Antonio.

The guy who’s pushing the issue is Doug Parker, the CEO of US Airways. In Parker’s view, there is excess capacity in the system and consolidation will help take some of this capacity out.In addition, Parker believes that the future of the Airline industry will have 3 or 4 large US carriers that have a complete global and domestic network along with 2 or 3 Low Cost Carriers operating domestically.Parker believes this will all happen eventually whether anyone likes it or not.He would rather control the issue than be a passenger of the process.

Will the Delta deal go through? I give it a 50-50 chance. This could all fizzle out in the short run, but in the long run, there is going to be additional consolidations.I get asked all the time how theses consolidations will affect us. Whether there are consolidations or not, the competitive landscape is always changing, but we’re always changing to meet it.We are always working to find the opportunities that are available in any operating environment that takes place in this competitive world.

One thing is for sure, we will keep making Akron-Canton Airport a better way to go, and keep filling up airplanes, which translates into profits for the Airlines. Profitable flights from CAK translate into great air service regardless of whether the industry consolidates or not.

Comments

Anything new at CAK. Seems rather quiet at all the airports in the region. What is up with your SCASD grant to get USAIR to Phoenix?

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