Airline Mergers: the Cost to Business Travelers Goes Up and Away…

We’ve all heard how US Airways tried to get the backing of employee unions to take over American Airlines.  American, now in bankruptcy proceedings, will fight, and whether unions will support or hold up any merger is undetermined.

Airline Survival 101

In order to survive, todays airlines recognize mergers as their strategy.  But as amenities dwindle for airline passengers, and downsizing eliminates employees, what can we potentially expect from this fine kettle of mergers and acquisitions “fish”?

Job Losses

In Q1 of 2012 American announced the cut of over 13,000 union jobs (2,700 pilots and flight attendants among them) as their “first wave” to streamline.  Cuts of another 1,200 non-union jobs, along with call center and airport lounge closures comprise the “second wave”.

But the goal of such a painful strategy (whether it results in bankruptcy, mergers or a combination of these) is for the airline to come out as “leaner and meaner” and to remain highly competitive with other low-cost and legacy carriers.

Passenger Suffering

Major cities with hub airports:  Competition is the juice to keep fares low and competitive.  The proverbial fly in the ointment are high oil and fuel prices in the short term.

Minor cities, minor airports: when a city on the airline route is deemed not profitable enough, it will be removed.  Empty and middle seats that don’t get filled cost, and those flights won’t make them enough money to fly.  As an airline removes a route that city’s airport sees less airline competition which, in turn, drives fares higher.

21^st Century Survival Strategy

The airlines are learning to do more with less.  It may hurt on many fronts, but the goal is to prevent the airline from folding (at least not immediately).  Meanwhile, as we continue to watch the airline mergers and cuts, and as oil and fuel costs rise, business travelers and business budgets will have a challenging “ride” in 2012.