Airline Mergers

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But mergers won’t help the airlines. At least, they never have before.

The conventional wisdom on the efficacy of airline combinations was dutifully reported in a Reuters dispatch last week: The legacy companies view mergers “as a way to stabilize the industry by allowing carriers to cut costs, reduce capacity, and raise fares.”

Stability? Hardly. In the 30 years since deregulation, the surviving legacy carriers have endured dozens of mergers. Almost all were disasters, with the acquiring carrier eventually being driven off most of the routes it acquired. The mergers led to debilitating strikes, management putsches, greenmail, and failed employee buyouts. Iconic brands such as Pan Am, Eastern, TWA, and Braniff disappeared without a trace. All the surviving legacy carriers except American Airlines have been in bankruptcy, some more than once.

Capacity reduction? The legacy carriers have shrunk their capacity, but the market has grown without them. As a group, the legacy carriers have shed a point of market share each year since deregulation. That’s opened the way for mavericks like Southwest Airlines, which was unknown outside Texas in 1979. Now it flies more passengers than any other U.S. airline and has turned a profit every year since 1973.

Raise fares? Nope. While prices for business travelers skyrocket after every merger, overall fares since 1979 have fallen consistently, in both real and inflation-adjusted dollars. Transcontinental fares routinely drop to $99 each way during slack periods; two years ago, they fell to $69 one way. Skybus sells some $10 one-way fares on all its flights. Or consider this: In 1966, a 14-day advance purchase roundtrip from New York to London cost $399. The same ticket costs $368 today.

Bottom line: This year’s airline mergers will probably inflict as much pain on the carriers as they will inflict on us. After all, it took a decade, a bankruptcy, and several C.E.O.’s for Continental to rebuild its reputation after the botched 1987 merger. That’s cold comfort, I admit, but the only kind of comfort we’re likely to see this year.

The Fine Print…
A followup to my column about passport and visa expediters: An expediter called ItsEasy.com has opened a 24-7 help desk in Terminal 4 at New York’s John F. Kennedy Airport, the nation’s busiest international gateway. As predicted in my 2008 Travel Agenda column, British Airways last week announced its subsidiary airline to fly nonstop between the U.S. and continental Europe. The most notable feature of B.A.’s OpenSkies is the “premium economy” class, between business class and traditional coach. It will offer 52 inches of legroom at each seat, about 15 inches more than any other carrier’s upgraded coach class.

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