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Rumors of airline mergers in the air

Rumors of airline mergers are in the air.

Delta and Northwest have been eyed as likely marriage partners since both declared Chapter 11 on the same day. More recently, United and Continental have been rumored to be in merger discussions. And US Airways, itself the spawn of the old US Airways and America West, has indicated that it would be open to merger opportunities.

The premise underlying such speculation is that there are too many airlines, trying to sell too many seats, for the universe of consumers to support. Too much supply, the thinking goes, forces the contending carriers to compete over-aggressively, depressing ticket prices and jeopardizing not only the airlines’ profitability but their very survival.

That assumption collapses under scrutiny. Airline load factors, the percentage of seats filled, have been robust over the past few years. And during the summer months, loads have approached 90 percent.

Whatever the causes, the rumors are real. And where there’s smoke, there’s typically fire.

What would mergers mean for the traveling public? On balance, the effects are likely to be negative.

First, the obvious: Fewer airlines means less competition, and less competition means higher prices. That you can take to the bank.

Second, and less measurable, is the organizational impact of combining enterprises.

Meshing the corporate cultures and work rules of merged airlines has historically proved more easily imagined than accomplished. Pan Am never fully digested National Airlines. The same with US Airways and Piedmont. American’s acquisition of TWA is generally deemed a misstep. (So far, the America West-US Airways has proven to be the exception. But it’s too soon to make a final determination.)

And then there’s the lowest-common-denominator syndrome. Part of the desired outcome of merging two companies is labor efficiencies: increasing the effective output of employees and decreasing the cost to fly one passenger one mile. That means shedding “redundant” workers, usually by offering buy-out packages to employees who voluntarily leave their jobs. In the real world, the best employees are the most likely to take the cash and run, because they stand the best chance of finding new jobs, often better jobs, elsewhere. Less competent workers, whose prospects are more limited, tend to remain.

The above two effects taken together amount to a dodgy proposition for consumers: pay more, get less.

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