It’s a busy week for me but I want to keep making some comments on various items.  There just won’t be the usual analysis until I settle down again.

On the US /AA merger:  The criticisms, comments and half-truths about reduced competition from this merger.  I realize that certain metropolitan areas have a lot to lose if a hub or focus city leaves your area.  Air fares will go up.  I also realize that there is a perception that air fares rise each time a merger happens.

A lot has changed in the airline industry landscape over the last 5 years.  It’s not your papa’s airline industry anymore.  For one thing, it’s focused on profits, not market share.  For another, if there are excessive profits on a route, there will be an airline that will enter that market.  It’s happening all around us.  Just look at the DFW market where AA is so dominant that you can sit at the DFW airplane viewing center and not see a different livery on an aircraft for an hour.

Spirit Airlines is here, jetBlue is here, Virgin America is here,  Frontier and Westjet (starting soon) are here.  That is some serious LCC competition.  Delta Airlines has entered AA dominant routes and United is starting to fire up some stuff on the Houston-DFW and Chicago-DFW routes too.

If air fares go up because of this next merger on a few markets, airlines *will* enter those routes because that is low hanging fruit and represents real profit.

Filed under: Mergers and Bankruptcy by ajax