Had enough airline upheaval? Well, get ready for more. The merger agreement between Delta Air Lines and Northwest Airlines could kick off a wave of consolidation that will directly change the flying experience for millions of travelers.
If regulators approve, the Delta-Northwest deal would combine the second- and fourth-largest U.S. airlines into one megacarrier—with the Delta name—that controls nearly 18 percent of the domestic market. Some analysts think that United and Continental may soon consummate another merger, forming an even bigger carrier with nearly a 20 percent market share. Here are the biggest changes travelers will notice if such deals go through:
Higher fares. This is happening already on account of high oil prices, which are forcing airlines to pass rising fuel costs on to consumers. Airline consolidation will add to the pinch. Fares won't necessarily skyrocket, as some merger opponents argue, but they'll rise modestly in most markets. That's because merged airlines will seek ways to reduce flights on routes where the two combined networks overlap, which is the same thing as reducing supply, which drives up the price. There's not a great deal of overlap in either a Delta-Northwest or a United-Continental scenario, but with many flights already packed, reducing supply by as little as 5 percent will bump up fares.
More crowded planes. This might sound hard to believe, since planes are already flying at a record average "load factor" of about 80 percent. But the math is simple: A cutback in flights—a basic assumption of any airline merger—means the same number of passengers will need to be squeezed onto fewer planes.
Big cutbacks on flights in a few cities. Cutting back on certain "hub" airports that handle a lot of connecting flights is a major source of savings the airlines are going after. Delta CEO Richard Anderson has said the new Delta won't slash flights at its half-dozen or so major hubs. Believe the boss at your own risk: When Anderson, the former CEO of Northwest, took the Delta job last summer, he also denied he was seeking a merger with his former employer. Of course, there's always a "change in circumstance" that justifies an about-face.
With soaring fuel prices, both Delta and Northwest are strapped for cash, with cutbacks likely anywhere possible. And overlapping hubs are an easy target. For the new carrier, the most likely cuts would be at Delta's operation in Cincinnati, since many flights connecting there could be handled at Northwest's Detroit or Minneapolis hubs instead. To a lesser extent, Detroit and Minneapolis could take over some of the connections going through Delta's hub in Salt Lake City. Northwest's Memphis hub would also become redundant in the shadow of Delta's huge Atlanta hub.
If United and Continental merge, Continental's connections at Cleveland would probably be slashed dramatically, since United's hub at O'Hare could handle much of that traffic. For connecting passengers, it makes little difference which city they travel through, but people who live in the affected hub cities would have far fewer nonstop flights available.
Less service in regional markets. Merged airlines would also cut back on service to some second- and third-tier cities, mainly because there would be redundant entry points for getting travelers from those cities into their networks. Seth Kaplan of the trade publication Airline Weekly has analyzed Lexington, Ky., as an example. The top two carriers at Lexington are Delta and Northwest, one reason there are nonstop flights to those carriers' hub airports in Atlanta, Cincinnati, Detroit, and Minneapolis. Once the two carriers merge, the resulting megacarrier won't need to offer four entry points into its network; one or two will probably be enough. Lexingtonians will still be able to fly to the others but not nonstop. Similar cutbacks could happen in a couple of dozen similar markets.
More opportunity for discounters. One check on rising airfares will be low-cost carriers like AirTran, JetBlue, and Southwest, which will probably find new markets open to them. To satisfy antitrust regulators, Delta may have to give up some gates in Atlanta to AirTran, for instance. The same thing could happen to the entrenched carriers at Chicago's O'Hare, New York's LaGuardia, and Washington's Reagan National airports. If the big carriers abandon gates at Cleveland, Cincinnati, Memphis, or Salt Lake City, discounters could snap those up, too.
Service problems. Merging the aircraft fleets, computer systems, and operating procedures of two airlines is an immensely complicated job that's certain to affect performance at some point. After the 2005 merger of America West and US Airways, for instance, the percentage of planes arriving late and bags getting lost skyrocketed, especially when the merged airline combined two reservation systems in the spring of 2007. "There will probably be some level of disruption to your customers," says Doug Parker, US Airways CEO. "You have to let them know there will be some disruption."
But not necessarily right away. The first six to nine months are relatively uneventful, Parker says, being mostly planning. But that only "makes the imminent pain that much worse, since your customers, employees, and managers start to think that it's all going to be painless." Experienced travelers should know otherwise.