Everyone heard the news. United airlines merging with Continental airlines to form the largest airline in the world. The number 3 airline merging with number 5 airline would thus form the biggest number one airline.
This airline would cover 307 destinations and 59countrieswould thus be accessible under single company. But is this merger good for anyone?
Let's start for managers of those airlines. Merger is great news for them as they get to cash in on their stocks. Is it good for investment bankers who backed the deal? Probably yes as once the economy turns around they will be looking at high return on their investment.
But what about the end consumers? Looking at history, everyairlineexecutive will admit that in order for them to survive theyliterallyhave to shrink the airlines and thay do that all over.
In the last year and a half USAairlineshave parked more than a thousand of jets in the deserts of New Mexico, Arizona and California. That's roughly theequivalent of taking one major USA airline completely out of business. This means that there will be 23% fewer seats available. When you look into laws of supply and demand this means that no matter happens with fuel prices the air fares are bound to go up.
If you live in a small community and find yourselfdependenton air service thisinevitablymeans less flights than before.
Bottom line is: Only few years ago, USA had 8 major airlines and now the number shrank to 4. And less competition almost always ends up in higher prices.