Acquisitions & Mergers at Airlines are not only the flavor of the month these days, they have been the go to action in the airlines industry for the past two decades. In recent years, the US airline industry has witnessed a series of acquisitions & mergers, resulting in the emergence of dominant carriers. While some argue that acquisitions & mergers bring benefits such as improved financial stability and operational efficiencies, others raise concerns about reduced competition and potential negative consequences for passengers. This article explores the impact of airline industry consolidation and examines the benefits and drawbacks it presents.
The Current Landscape:
The US airline industry is now dominated by three major carriers: United Airlines, Delta Air Lines, and American Airlines. These airlines have emerged through a wave of mergers that saw the disappearance of several commercial airline brands. Alongside these dominant players, Southwest Airlines has also strengthened its presence. However, the concentration of power in the hands of a few airlines has raised concerns about the implications for passengers.
New Players on the Scene:
Amidst this landscape, JetBlue Airways is seeking to acquire Spirit Airlines, the nation’s largest ultra-bargain-seat air carrier. If the deal goes through, it would make JetBlue the fifth-largest airline in the country and further shrink the industry. Additionally, Alaska Airlines has surprised the sector with its announcement to purchase Hawaiian Airlines. These developments indicate that 2024 could be a year of significant milestones in airline acquisitions & mergers, both in the US and globally.
Airline Acquisitions & Mergers Worldwide:
Acquisitions And Mergers at Airlines, Beyond the US, Europe is also witnessing potential changes in its airline landscape. Lufthansa hopes to acquire a stake in ITA Airways, the Italian flag carrier. International Airlines Group aims to strengthen its Latin American network through the acquisition of Air Europa, while Air France-KLM is considering taking a stake in Scandinavian Airlines (SAS). TAP Air Portugal is also attracting interest from various carriers as it moves towards privatization. These developments highlight the global trend towards consolidation.
Airline Acquisitions & Mergers Examining the Benefits:
Proponents of airline industry consolidation argue that it brings several positive outcomes. Firstly, mergers with financially struggling airlines allow larger carriers to stabilize their operations and enhance their financial performance, ensuring a more sustainable industry. Consolidation also facilitates operational efficiencies, as merged airlines can streamline operations, optimize fleet utilization, and reduce costs. These cost savings can then be passed on to consumers through lower fares. Moreover, mega mergers enable carriers to compete more effectively on the global stage, expanding their international routes and attracting more passengers.
Airline Acquisitions & Mergers Addressing the Concerns:
Critics, however, express valid concerns about the potential negative consequences of airline industry consolidation. The concentration of market power resulting from major mergers may lead to reduced competition, potentially resulting in higher fares, limited consumer choices, and diminished service quality. Furthermore, the disappearance of once-iconic airline brands erodes diversity and competitiveness, potentially stifling innovation and limiting options for passengers. Consolidation can also impact labor, leading to job losses, wage stagnation, and diminished bargaining power for employees. Lastly, with fewer competitors, airlines may have less incentive to prioritize customer service, potentially resulting in a decline in overall service quality.
An article by consumer and travel advocate Christopher Elliott concurs these findings and adds some new “oomph.” He writes:
Airline acquisitions & mergers s have harmed American air travelers on a breathtaking scale, he notes. A series of airline consolidations in the last two decades have left them with just four dominant carriers, which have raised prices and, with one notable exception, offered shamefully bad customer service.
“We haven’t had such a concentrated aviation industry in the United States in over 100 years,” says Bill McGee in an interview with Elliott. McGee a senior fellow for aviation at the American Economic Liberties Project.
Acquisitions And Mergers
Acquisitions And Mergers at Airlines and these too-big-to-fail airlines deliver astonishing returns to their shareholders, but it comes at a high price. Passengers end up paying more and getting less because competition is all but eliminated. Research suggests that fares rise between 5 and 6 percent on overlapping or potentially overlapping routes, although the price increase has reportedly been higher after some of the latest mergers.
McGee says we’re caught in a “me-too” wave of smaller consolidations as airlines try to reach a critical mass to stay competitive. But that doesn’t make these corporate marriages any different from past ones.
The net effect will be the same: fewer choices, higher fares.
And customers are right to want to stop them. But how?
Standing in Your Power
Fortunately, air travelers have a powerful ally. The U.S. Departments of Justice and Transportation have finally drawn a line in the sand and sued to block the proposed JetBlue-Spirit merger. The trial ended this month, and observers expect a ruling early next year.
In the past, the government stepped in to mitigate some of the worst effects of airline consolidation. For example, in order to approve the merger between American Airlines and US Airways, it mandated that the airlines divest themselves of some landing slots. But it wasn’t enough to overcome the huge problems created by the merger, like the loss of competition and, inevitably, higher fares.
Consumer groups are lining up against both mergers, too. Just this week, a coalition of seven organizations, including the American Economic Liberties Project, National Consumers League and Open Markets Institute, jointly sent a strongly worded letter to government regulators urging it to block the planned merger of Alaska and Hawaiian.
“Neither the airline industry nor American consumers can afford the further loss of airline competition that Alaska’s purchase of Hawaiian Airlines represents,” the consumer groups noted.
Ways to Fight Airline Acquisitions & Mergers
You’ve probably heard a lot of so-called experts talking about the benefits of the latest mergers. The first step to fighting these mergers is to understand that the experts are not telling the truth. They’ll say whatever the airlines want them to, and they’ve never seen a merger they didn’t like.
To be clear, if any of the mergers on the table go through, your ticket prices will rise and service will go into freefall. So what can you do about it?
If you’re a shareholder
If you hold shares in any of the airlines considering a merger, let the company know your misgivings. This may be difficult for you, since the value of your stock will be affected by the approval of the deal. But what’s good for shareholders isn’t always what’s good for passengers.
As a voter
In an election year, your elected representative might actually listen to you, as opposed to the donors who are pushing for these mergers. Bonus points if your representative sits on one of the subcommittees with oversight of the airline industry.
If you’re just watching
Even if you only fly occasionally, your voice is still important. You can send your comments to Jonathan Kanter at the Department of Justice Antitrust Division. I’ve heard from multiple sources that the government is interested in hearing from consumers on this issue.
“Consumers have a voice when it comes to airline mergers,” says Anthony Radchenko, CEO of AirAdvisor, a company that advocates for air travelers. “It’s incumbent on passengers, workers, and others worried about the Alaska-Hawaiian merger to send your concerns to Jonathan Kanter at the DOJ’s Antitrust Division so that the Department of Justice can rely on real-world complaints to fight this latest battle in the war on competition.”
Acquisitions And Mergers at Airlines And what if the latest mergers somehow get approved? Well, there’s one last option available to you as a U.S. citizen. You can vote for candidates who promise to stop rubber-stamping mergers and to protect competition — and American consumers. You’ll have an opportunity to do that in November.
Elliott’s tips on fighting airline Acquisitions & Mergers
Acquisitions And Mergers at Airlines Passengers don’t have to accept the latest mergers as inevitable. Here are a few ways you can influence the outcome:
– Speak your mind. Write to your representative and contact the government regulators now. Let them know how previous airline mergers have affected you and tell them how you feel about the latest combination. The government is listening.
– Avoid monopolistic airlines. Don’t reward the monopolistic airlines with your business or your loyalty. Instead, go out of your way to fly one of the smaller carriers that retain their independent spirit — startups like Avelo or Breeze.
– Leverage your loyalty. If you’re a frequent flier on Alaska or Hawaiian, now is the time to say something. If your loyalty program card is gold, silver or platinum, you should let your airline know what you think of its proposed merger. As an elite-level frequent traveler, you have the ear of your airline.
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