Tuesday, January 31, 2012

Think Flying is Bad Now – Wait Until Delta and U.S. Airways Merge

Want a Boarding Pass?  That Will be $10.00

The Wall Street Journal is reporting that Delta Airlines is exploring the acquisition of U. S. Airways in a merger that would create one of the largest carriers in the world.

Delta hasn't yet approached US Airways, the No. 5 U.S. airline, and is still weighing which deal if any would make most sense and have the best odds of success, the people familiar with the matter said. Delta's last transaction was in 2008, when it acquired Northwest Airlines.

Now the interesting thing here is that should Delta pursue its wedding with U. S. Airways, opposition will be voiced, because the competition in the airline industry will take a giant leap downward.  In fact, consolidation of airlines has been a long term trend

The recent tie-ups have formed larger airlines and reduced the number of major U.S. carriers to five from roughly triple that number 20 years ago.

The consolidation has helped the surviving airlines jettison money-losing routes, raise ticket prices and tighten control on their hub airports.

Notice that this consolidation has not helped the public, and in fact the airlines haven’t done all that well either.

But further consolidation will lead to near monopoly status for the remaining airlines.  And if anyone plans to fly after U. S. Airways and Delta have merged, well have your wallet out.  The people who thought up bag fees will have their hands out for fees for just going through the door, you know, an optional fee that allows a person to actually board the plane.

Opposition to the granting of monopoly status to airlines will be tarred with the term “anti-capitalism”, but capitalism is characterized by competition.  The problem of course is that those participating in free markets have too much capitalism and want to replace the competition with monopoly.  

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