Airlines Talk Mergers - Rumors of Air Travel Industry Consolidation

Many within the airline industry have been speaking up on the need to consolidate the industry in the United States. Other parts of the world, particularly India, have been moving in that direction after years of rapid expansion. Could the same be said for a different labor and company situation half a world away?

So many of the rumors began in early 2007, when a foiled takeover ploy by US Airways, who were vying for Delta Airlines, didn't materialize. US Airways did succeed a few years ago, taking over America West with some setbacks regarding integrating the airlines. Fist fights between union members allegedly occurred, and harmonizing the computer reservations, and airport check-in did not go ahead without some difficulty.

Even the low cost airlines got in the act - Air Tran attempted a hostile takeover of Midwest Airlines, and were thwarted.

The latest round of merger possibilities involve nearly all of the largest airlines in the United States: United Airlines, Delta Airlines, Continental Airlines, and Northwest Airlines. Plus, US Airways cannot be ignored in potential mergers in the future.

Even CEOs within air travel are siding with consolidation. Over at United Airlines, the CEO has been quite outspoken in favoring the move towards mergers.

2008 brings different factors towards mergers than just a year ago. So what are the factors? And who are the players involved?

Possible Reasons for Merger Talks

• Economic slowdown that seems to be sinking in
• Huge increase in operating costs from skyrocketing fuel prices
• Some labor unions have stated that they may be open to mergers, if the conditions are good
• Past bankruptcies - with the idea that a merged airline can compete more effectively both at the domestic and international level

There are obstacles too - anti-trust regulators, and the fact that it isn't easy to merge workers from different unions, and seniority issues. Also, there is the concern that prices will go up, as less airlines may mean less airfare competition.

The Players

United Airlines
- could still be a possible target for Delta Airlines. Could also have Continental as a possible merger mate.

Continental Airlines
- seems to be taking more of a wait and see approach. May be interested in United or Northwest depending on how rumored talks go between Delta and Northwest.

Delta Airlines
- seen as most likely to talk with Northwest Airlines about merger possibilities.

Northwest Airlines
- seen as most likely to talk with Delta Airlines about merger possibilities.

US Airways
- seems to be maintaining a low profile regarding merger talks right now, but did attempt a takeover of Delta in late 2006 - early 2007. Could possibly be waiting to see what happens. Has not really been mentioned as a possible merger partner this time around.

What is interesting if there is any actual resulting merger with any of the aforementioned airlines, there may be greater pressure for the other airlines to hook up in order to compete with a bigger airline, with a more extensive network of routes.