The Stig
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Post by The Stig on Feb 7, 2008 16:05:06 GMT -5
online.wsj.com/article/SB120233579961148771.html?mod=yahoo_hs&ru=yahooSources are telling the Wall Street Journal that Delta and Northwest will announce that they are merging within the next two weeks. That announcement will void Northwest's Golden Share in Continental, allowing them to merge with United. The Continental-United merger will be announced shortly after the Delta-Northwest to ensure that the mergers undergo the same regulatory scrutiny. The airline industry badly needs this, but as a consumer this will probably not be a good thing due to higher fares.
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Deleted
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Post by Deleted on Feb 7, 2008 16:23:59 GMT -5
It's only a matter of time before we're ALL flying Southwest Airlines or Conglomerate Air...
... and nothing else.
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The Stig
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Post by The Stig on Feb 7, 2008 16:32:25 GMT -5
The irony is that Southwest is the one airline out there that doesn't go around buying up other airlines or merging.
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hoyatables
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Post by hoyatables on Feb 7, 2008 16:33:01 GMT -5
Wow -- very interesting. Will take some time for the airlines to make their way through the review, but this is interesting. I wonder what would happen to the United-US Airways codeshare? I'm guessing it would get zonked. So Delt-west would have hubs in JFK, Atlanta, Memphis, Cincinnati, Detroit, Minneapolis, and Salt Lake City (along with the lucrative Northeast Shuttle and strong presence in Boston and LAX). Of Detroit, Cincinnati, and Memphis, something has to go. Probably Cincy. And Co-nited would have hubs in Newark, Dulles, Cleveland, Chicago, Houston, Denver, SFO, and LAX. United finally gets to bust into the Texas action. Newark, Dulles, Cleveland and Chicago are too close -- my guess is that Cleveland is eliminated as a hub? So basically Ohio ceases to be relevant. Perfect. .
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theexorcist
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Post by theexorcist on Feb 7, 2008 16:51:27 GMT -5
The Continental-United merger doesn't make a lot of sense. I see the world based on airline "clubs", of which there are three major ones - oneworld, Star Alliance, and SkyTeam. Northwest and Delta are both in SkyTeam. Continental is in SkyTeam and United is in Star Alliance. Rejiggering ALL of Continental's schedules doesn't seem really possible.
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The Stig
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Post by The Stig on Feb 7, 2008 17:06:52 GMT -5
United-US Airways codeshare would stay under this scenario. That comes from their joint membership in the Star Alliance.
Delta, Nortwhest, and Continental are all in Skyteam. Delta-Northwest would stay in Skyteam (the merger is being pushed by fellow Skyteam members Air France/KLM), but a merged United-Continental would almost certainly go to Star Alliance, meaning the United/US Airways codeshare remains.
As far as names are concerned, I read that Delta made keeping their name as a condition for a deal. I'm not sure if that was PR talk or actual policy. I think that the Delta management would probably take the top jobs in the merged airline, since Delta seems to be in better shape that Northwest right now.
Continental-United would almost certainly take the United name, since it's better known in the US and abroad. However, the Continental management would probably run the show, since they know how to run an airline (unlike the incompetent fools at the top of United).
Your hub prediction seems pretty accurate. Newark or Dulles both serve as transatlantic gateways, so one might be cut back (probably Dulles). However, they might be able to coexist due to the size of the markets. Northwest has shown that it's possible to have your two biggest hubs in the same part of the country.
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The Stig
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Post by The Stig on Feb 7, 2008 17:34:37 GMT -5
The Continental-United merger doesn't make a lot of sense. I see the world based on airline "clubs", of which there are three major ones - oneworld, Star Alliance, and SkyTeam. Northwest and Delta are both in SkyTeam. Continental is in SkyTeam and United is in Star Alliance. Rejiggering ALL of Continental's schedules doesn't seem really possible. Sure it's possible - airlines have to do it when they join alliances. All the airlines have scheduling gurus who can change all the codeshares and such in a few weeks. The biggest problem in any of these mergers will be integrating the unions. Northwest and United both have pretty militant unions. Delta's pilots' union has basically said that they will only support a merger if they get a cut of the pie. Continental's unions seem pretty content, but they won't like anything that jeopardizes their current good deal.
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Post by Coast2CoastHoya on Feb 8, 2008 11:00:29 GMT -5
The airline industry badly needs this, but as a consumer this will probably not be a good thing due to higher fares. For all you economists out there, can you tell me why, as a consumer, I would want this to happen?
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Bando
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Post by Bando on Feb 8, 2008 13:26:57 GMT -5
The airline industry badly needs this, but as a consumer this will probably not be a good thing due to higher fares. For all you economists out there, can you tell me why, as a consumer, I would want this to happen? I'm not an economist, but the upside for consumers would seem to be the service in the long run. That is, you can have a bunch of hobbled airlines with cheap fares and crappy service, or you can have less, more stable airlines with higher fares and good service. At least that's my understanding of it.
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Post by Coast2CoastHoya on Feb 11, 2008 16:28:50 GMT -5
What services are you speaking about, Bando? The principle you mention is clear, but I'm looking for some examples.
The main reason is that I fly all the time - at least two legs a month, sometimes 10 or more legs a month. I go everywhere from NYC on the shuttle, to the redeye back to DC from Alaska, to podunk little towns in the Mtn West on prop planes. I fly coast to coast at least once a quarter, usually more, almost always to CA or AZ. I fly the major carriers (United, American), the mid-major carriers (Southwest, jetBlue), and the little airlines whose names don't make sense (Great Lakes Airlines is based in Wyoming, you say?). I can unequivocally say that in the last 7 years air travel has become less convenient, service has gotten worse, and you have to pay for EVERYTHING onboard now. Yes, even DirectTV costs $5 and movie rentals $8 (this was the case on my last flight to Denver). On the flip side, fares are generally pretty low historically speaking, e-tickets and e-kisosks have made the overall experience much easier in other ways. And yes, MUCH of this has to do with TSAs regs in response to the threat of terrorism and the price of oil, and I'm not pinning that on the industry.
So in a broader sense, what is the benefit to the consumer of mergers like this? Ensuring that air travel doesn't go the way of Amtrak (i.e. highly subsidized, unprofitable, inconvenient outside of the NE Corridor, and uninnovative?). Not having to pay for every little thing on board? Reasonable fares at convenient times? I could get behind all of those things. But if this is a way for airlines to simply realize greater profits (and shareholder dividends) without commensurate benefits to travelers (like rolling back some of the cuts) I'm not so sure I can support it. The only way for the market to work things like this out is if there's competition. Like I said, I'm no economist, but I've always been told by free-marketeers that competition, consumer choice, willingness to pay, and such things ensure that a healthy balance between profit mongering and consumer bliss will be struck. I'm just wondering what balances this equation.
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Cambridge
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Post by Cambridge on Feb 12, 2008 12:58:47 GMT -5
Continental still serves FREE meals and shows films on their transcontinental flights. Don't take that from me United. Oh, and I much prefer flying out of Newark than any of the other hell holes in the NYC area.
PS If I have to change flights in Phoenix ever again it will be too soon. You have to exit security and take a bus then go through security again if you have a terminal change...I you not. Great choice as a hub USAir, maybe that's why you are a joke of an airline.
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Post by Coast2CoastHoya on Feb 12, 2008 13:44:27 GMT -5
Cambridge -- very true about Continental & Newark; it's one of the reason they're my favorite major carrier and I fly them whenever I can. Also true about Sky Harbor. Eeesh.
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DFW HOYA
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Post by DFW HOYA on Feb 12, 2008 13:55:48 GMT -5
I'm not an economist, but the upside for consumers would seem to be the service in the long run. That is, you can have a bunch of hobbled airlines with cheap fares and crappy service, or you can have less, more stable airlines with higher fares and good service. At least that's my understanding of it. I think another argument is whether consumers truly want "service" as it was once defined. Sure, the coat and tie people on the plane (for those of you who haven't discovered business casual) look fondly on the amenities of the past, but that's largely gone the way of the 8-track tape and the Polaroid camera. Consumers vote with their wallets and have rejected "first class" amenities for the price elasticity of low fares; otherwise, the airlines would be charging as much as the market will allow. Jetblue has a niche in providing a higher standard of amenities, but it's certainly not Pan Am or Braniff in their heyday and never will be. Much as the traveling public gave up on sleeper trains and "scenicruiser" bus travel, it has given up on paying $600-$1,000 extra to sit in the front of a plane.
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The Stig
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Post by The Stig on Feb 12, 2008 14:00:58 GMT -5
US Airways has a double-whammy for bad airports - they also hub at Philadelphia, which is a notorious dump.
The worst airport for connecting is Kansas City (Midwest Airlines and Southwest route some flights through there). It was designed in the days before airport security, so every 2-3 gates has its own security checkpoint, with no connections between the sections. Almost every connection there involves going through security again There are also almost no concessions or restaurants after security (they only recently added bathrooms).
It's a shame, because Midwest is the best domestic airline in the US by quite a good margin.
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Cambridge
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Post by Cambridge on Feb 12, 2008 14:15:53 GMT -5
I am putting in a vote for Virgin America as a future contender for Jet Blue. As a Bay Area based Hoya who travels to NYC, LA and DC a lot...this airline is awesome. Not only is it basically cheaper than Jet Blue right now, but its inflight service is better and their flights are almost always ontime.
Also, while its somewhat annoying that they charge for a lot of things during the flight (food, booze and premium movies), five things save them:
1) They use a credit card system on your personal touch screen/tv set to pay for everything including food. This means it feels like fake money (especially if you are expensing it anyways). 2) You can order food, drinks and entertainment (free and otherwise) at any time. They just come around and deliver it minutes after you order. 3) Their food is excellent. As is their selection of tv channels, free movies, recorded tv shows (wire, dexter, etc) and premium movies. 4) As with Virgin Atlantic, unusually high number of hot attendants. 5) Fly out of international terminals, which (as with Jet Blue) means much shorter security lines.
Weirdest aspect of the airline, they use a weird purplish mood lighting scheme and play trance like trip hop while you are boarding.
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Post by AustinHoya03 on Feb 12, 2008 14:29:04 GMT -5
US Airways has a double-whammy for bad airports - they also hub at Philadelphia, which is a notorious dump. The worst airport for connecting is Kansas City (Midwest Airlines and Southwest route some flights through there). It was designed in the days before airport security, so every 2-3 gates has its own security checkpoint, with no connections between the sections. Almost every connection there involves going through security again There are also almost no concessions or restaurants after security (they only recently added bathrooms). It's a shame, because Midwest is the best domestic airline in the US by quite a good margin. And Charlotte is the other hub...it's cool because it has a mall in the airport! Never mind that whenever I've flown through there my flight is delayed. Despite the fact two of my relatives fly for US Airways, I must admit that it is tied with United for "common carrier I try to avoid most." If you fly anywhere on the east coast from Austin or San Antonio on US Airways, enjoy your first leg of the trip to Phoenix. KCI really isn't that bad unless you're flying at peak time. You have to go through security again, but since there is a security station for every five gates you usually just walk right through. I've never flown Midwest -- what's so special about them?
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Cambridge
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Post by Cambridge on Feb 12, 2008 14:38:41 GMT -5
BTW I love the Austin Airport. It's modern. The layout is logical and avoids bottlenecks. The food is pretty good (they have a salt lick for godsake) and getting their is quick and easy from downtown...except during the brief flashflood style logjams of Austin rushhour.
Flying in and out of their I prefer Continental (with a transfer through Houston) or the direct flight to San Jose on American.
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Bando
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Post by Bando on Feb 12, 2008 15:08:05 GMT -5
I obviously should have been checking up on this situation more, but by "service", I meant among other things:
- having well maintained planes (well enough they're not constantly being delayed for service) - being sufficiently staffed (so you're not waiting for pilots, getting your luggage lost, etc.) - having more flights to more places
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SFOHoya
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Post by SFOHoya on Feb 12, 2008 19:03:59 GMT -5
I fly a lot/too much (mostly UA and Star Alliance) so all this talk of merging is of interest to me.
USAir / America West is still a mess after their marriage. Put me in the camp that believes the mergers will help no-one but the management team$ and the people advising them.
Just let a couple of these airlines go bankrupt... for some reason we / the gov't feel the need to save them, over and over again. Since there is no penalty for bad management, it is a race to the bottom (lowest fares, crappiest service, bad business plans, etc)
Also, allowing foreign carriers to own more than 25% of domestic carriers would help strengthen the non-LCCs (even LCCs as shown by LH buying a stake in JetBlue) while bringing in competent management.
As for UA, their management is chomping at the bit to sell. I believe Tilton (UA CEO) has a strong personal financial incentive to do so - I'll have to look it up. Uni-Con could be the best of both worlds, but more likely will result in showcasing the worst of each airline.
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The Stig
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Post by The Stig on Feb 12, 2008 21:24:52 GMT -5
There are only two airlines in the US that manage to keep their customers happy, keep their employees happy, and keep their shareholders happy: Southwest and Continental. If Continental runs the show at a combined United/Continental they could have a great airline. If Tilton and his band of crooks get into the front office it'll be a disaster.
The NW/Delta scenario is interesting because Richard Anderson (Delta's CEO) used to run Northwest, so he already knows the head honchos over there. From the employees' point of view he was the least disliked CEO they've had in the recent past. He'll probably end up running the show at a combined Delta/NW, which is good because it gets Northwest's awful current management out of the picture.
The problem with the "legacy" US airlines is that they've tried to beat the LCC's by emulating them. They've reduced the service gap between the LCC's and themselves, which leaves them in an uncompetitive position because they have a tough time competing with the LCC's on cost. As a result a lot of the legacies have cut back on domestic flying and have focused on international expansion. Unfortunately, that just exposes them to competition from foreign carriers, almost all of whom have better service and fares than the US carriers.
I think that there's still a market for a full-service airline in the US. You know, an airline with blankets, pillows, nice seats, good legroom, and free meals. You might pay a bit more, but it's money well spent. Continental comes closest, but they're still not quite there. Midwest somehow manages to offer business class seats on the entire plane for coach fares, but they had to put some regular coach seats in to pacify their investors when Airtran tried to buy them out.
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