Summary
All legacy carriers bar a few special cases are suffering at the hands of the GFC.So it would seem illogical that in an industry that has significantly underperformed as well as facing an uncertain future would want four fairly sickly players to come together.
Analysis
On the face of it - the chance to consolidate always makes sense - especially when it creates closed markets and chances for price control.
However airlines have always failed to demonstrate either. From the position that smaller players equals greater market power it would seem logical that this would make sense. Two factors tend to work against the idea.
Factor one - market control is rare in any airline market.
Factor two - if prices rise too high then consumers find alternatives.
Overlay that all four airlines are struggling in today's climate and then you see that this is not a good idea unless someone really thinks that it will result in a good long term future with a significant payback.
Frankly given history and - well logic - this doesn't seem to make sense. But for their sake - let's hope I am wrong. For the money people who will have to bring this to fruition, the cost of the cash will likely be high.
And the question - please see my other analysis for a detailed view on AA vs DL.
Timothy O'Neil-Dunne consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
