There has been quite a lot of talk in the media about mergers recently.  Financial analysts are high on the idea and two airlines in particular have batted their eyes at potential suitors again. 

The CFOs of both United Airlines and US Airways have made recently comments stating they see more consolidation needed in the US airline industry and both said their airlines remain open to the idea of merging with someone.  No big surprise because both of those airlines are arguably the poorest performing legacy airlines in the US.   It’s also no big surprise that financial analysts now want to see another merger because they’ve seen the financial response to the Delta/Northwest merger. 

I don’t see it happening myself.  Neither US Airways nor United Airlines happen to be particularly attractive properties for another airline for one.  Neither American nor Continental really have anything to gain by mating up with those two for example.  Well, Continental could benefit from UA’s Chicago hub and its international business.  American already has a nicely balanced business and, more importantly, it needs to focus on its labor problems and get those solved first. 

Continental has done better by managing itself and its employees carefully and really isn’t inclined to pick up one of the two airlines with some of the worst labor relations around.  They’re kind of smart over at Continental.  Now that they’re in the Star Alliance, they have the best of both worlds going for them.

So why don’t UA and US join together?  Well, their hubs would fit together kind of nice and there would be some nice synergies to be realized in consoldating operations.  Even their fleets kind of work together.  However, UA is headed by Glenn Tilton who isn’t interested in giving up his position to someone else unless they, too, are an airline titan.  He’d benefit from a merger personally but his ego doesn’t seem to want to let him have UA be the “consumed” airline.  He wants to buy and consume someone else. 

US Airways is being managed by Doug Parker who has plenty on his hands already with a pilot group that is so dysfunctional that it would make wife-beating appear respectable and his airline is short cash anyway.  He’s got no money to buy anything with and his somewhat anemic route structure isn’t all that attractive to any other airline.  No one wants his labor problems at all. 

Besides, I”m not sure consolidation is what this industry needs.  A liquidation could actually be the better answer.  More on that tomorrow.

Filed under: Airlines Alliances by ajax
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