4 Major Airlines Teaming Up in 2 Alliances
Four of the nation’s largest airlines will form two separate domestic alliances that stop short of actual mergers but will effectively consolidate the industry into a handful of dominant carriers.
American Airlines and US Airways said late Thursday that they have agreed on a broad new marketing relationship that will eventually treat their respective routes as a single airline. United Airlines and Delta Air Lines are scheduled to hold a news conference today in New York to announce a similar alliance.
Continental and Northwest Airlines announced a similar link earlier this year, sparking the new actions by their competitors.
What impact this wave of consolidation will have on consumers is still unclear, analysts said. The seamless linkage of frequent-flier programs, route systems and flight transfers should mean more convenience, but it could also mean higher fares, fewer choices and less generous frequent-flier programs.
But industry analysts said it is too early to say how the new “big three” will use their concentrated power.
Under the deals, United and American--the nation’s two dominant carriers--will gain important footholds on the East Coast, where Delta and US Airways are very strong. Essentially, Delta and US Airways will serve as East Coast feeders for the lucrative transcontinental and overseas flights of their new partners.
Julius Maldutis, an industry analyst with Salomon Smith Barney, said the alliances will provide the airlines with “60 to 70% of the revenue benefits of a merger without any of the headaches.”
The linkage with American is also crucial for the long-term survival of US Airways, analysts said. US Airways was the only major airline without either a domestic or international marketing alliance and could have found itself at a serious competitive disadvantage in the wake of the Delta-United deal.
Marketing alliances allow two airlines to act in some ways as a single carrier, sharing schedules and even profits in what amounts to a virtual merger without any of the financial and employment consolidations of a traditional corporate marriage.
By not actually merging, the airlines get the benefits of their new consolidated markets without the need for regulatory approval or having to combine their unionized work forces.
Federal regulators could still raise questions about the impact of the alliances on competition, but prior approval is not required, company sources said.
