Tuesday, 15 April 2008

More US Airline Mergers Likely

US-based flyer Delta Air Lines (which emerged from bankruptcy just a year ago) has announced a deal to buy rival Northwest Airlines, in a major stock deal.

The new merged airline will become the world's largest carrier. Delta is current the third-biggest US airline (by traffic), while Northwest holds the number 5 spot.

The combined carrier will have 800 aircraft and 75,000 employees, passing American Airlines as the world's largest by traffic.

The Delta/Northwest deal is likely to speed up merger plans by other rival airlines. Many commentators believe United Airlines is still in a delicate position, after having emerged from "Chapter 11 bankruptcy protection" in early 2005 after three years of restructuring.

It's understood United (America's #2 carrier) is in "advanced merger talks" with #4 US carrier Continental Airlines (although Continental is also believed to have met with American Airlines).

Continental bosses have previously said they'd prefer the airline remained independent, but were prepared to look at their options "if the competitive landscape changed".

A combined United/Continental airline is expected to be part of the Star Alliance frequent flyer programme. United is a founding member of SA, but Continental is currently a member of SkyTeam. However their large New York hub at Newark airport would be welcomed by European SA members.

The consolidation plans come as rising fuel costs and the slowing US economy puts added pressure on the already shaky airline industry.

America's eight largest carriers are expected to post a combined first-quarter loss of (US)$1.4 billion, and aren't looking forward to the increased trans-Atlantic competition from European carriers. Four small US airlines have recently filed for bankruptcy, including Frontier and Skybus.

But while the mergers are likely to be good for the airlines, they're likely to result in higher fares for passengers, and less choice with a reduction in the number of daily scheduled flights.

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