People tend to get concerned when they hear the words consolidation or merger when used with the subject of Airlines. Recent consolidations have created arguments from analysts, labor officials and consumers. Some say mergers lead to efficient services while others believe this will lead to loss of jobs, less flight schedules and almost always higher fares.
So, what does happen when two or more airlines decide to consolidate or agree to a merger? The consolidation/merger will go through several steps that will ultimately lead to one operation. Below is a brief summary of some of the steps they will need to partake in:
- The airlines involved will need to sign an agreement after all legalities have been negotiated.
- Integrate management, routing structures, develop and obtain regulatory approvals concerning maintenance operations and conduct training.
- Then there is the Labor phase to consolidate and combine their respective work groups.
For the consumer or traveler:
- Traveler’s previously purchased tickets are usually honored with no problems. (Occasionally flights have to be cancelled or rescheduled due to the merger but they try to accommodate the traveler even if they have to go to another airline to fill their needs.)
- Frequent Flyer status and points are transferred to the revised programs without any issues as well.
Once the airlines have consolidated the consumers, businesses and travel management systems feel the effects that can sometimes be good but also bad at the airport and in the market. With less competition in most major markets the merger can reduce the amount of schedules offered and no longer at the lower fares. Passengers that were loyal to their particular airlines may start to look elsewhere for cheaper flights and to those who offer more departures on additional days and times, all depending on what other airlines are offering at the time.
Consolidation can cause the merged airline’s routes to overlap and for certain cities with major hubs this causes a loss in service for one or the other airlines therefore creating fewer flight schedules. This eventually can cut into the offered non-stop flights that were previously offered and reduce the benefits that were previously given to a traveler who frequents those routes.
Often the high ranking companies that provide on-time service can be hindered by their partnered airline(s) if they do not meet the same requirements or performance. It doesn’t appear to improve customer service when airlines try to become more efficient for their own gains. After a merger has been completed the special features that once drew a consumer to their airline to begin with has been dropped from the new integrated package of services offered. In order for the airlines to co-exist they still offer special services but without the frills and generally at a higher rate now that they are no longer competing with each other for the business.
Reduction in the flight schedules also opens up another problem. If you reduce the availability of different times and multiple days of departures are you not opening this up to your existing competitors to jump on the opportunity to take over with offering more flights themselves gaining popularity with the public? Yes, this may result in gradually lowering fares but at what cost to the traveler. Can the consolidation of airlines between large low-cost and low-fare carriers partner with others and still bring balance and protection to the consumer?
And what about our fellow Federal and Business travelers, will the companies be able to or want to maintain or provide their services through the GDS (Global Distribution System) and SABRE systems that most managed travel programs use? A lot of independent airlines have been finding ways of going out on their own and avoiding the participation in the systems so that they don’t have to participate.
Several questions come to mind when we think of how and what our future travel needs will be. Can a consolidation or merger change those needs? Technology has played a big part in business travel by reducing some of the need to travel for meetings, training and conferences, all with the help of the innovation into Video and conference calling and the WebEx capabilities offered to just about all businesses. Economic hardships for the industry and consumer have had an even harder impact on how people choose to travel. Add to this the concern for safety from airplane maintenance to the fear terrorists.
To me the positive side of this is that you have two or more airlines that are trying to work together to make a good thing happen by giving a company a second chance.
By: Debbie Hardman
“The views expressed are those of the author and do not necessarily reflect the position of the Bureau of the Government or my Agency.”