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Implications of United and US Airways Merger by Steve Robinson
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Implications of United and US Airways Merger |
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Travel & Tourism
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Concern has been raised over a possible merger of United and US Airways as to its potential further impact on cheap travel, particularly cheap airplane tickets and cheap vacation packages. Every time there is one less major airline flying its means that there is one less airline out there to respond to its falling market share or weak sales and react by announcing a big sale or adding more low priced seats. Merger talks have been going on between the two money losing airlines for at least a couple of weeks and are not expected to be completed prior to the of April. This is by no means a done deal. This is at least the third time the two carriers have entered into merger talks since the early ‘90s. U.S. and overseas carriers are increasingly looking towards consolidation as they continue to lose money and deal with a recession that has resulting in fewer people traveling. Last week British Airways and Spain’s Iberia announced a merger deal that they hope will positively impact their bottom line. Two years ago Delta Air Lines purchased Northwest Airlines, creating the world’s largest airline. Any merger between United and US Airways would have to be approved by government antitrust regulators and labor unions. Experts believe that gaining such approval would be easier this time than in the past. Today there are additional, stronger discount carriers which might prevent higher airfare prices after such a merger and counter balance regulators’ fears concerning lack of competition. Industry experts believe that to gain labor support for this merger a pay raise of at least 10% would need to be offered which would add $650 million to the two airlines current labor expenses. This may be possible if the forecasted $1.8 billion a year of cost savings and revenue gains can be realized as a result of combining these airlines. At this time labor’s support of this merger is still up in the air. www.cheapfares.com
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