Consolidating airlines

Last week, the Lufthansa Group agreed to purchase 81 Air Berlin aircraft as it grows its low-cost unit, Eurowings, CEO Caston Spohr told Germany's Rheinische Post newspaper.Air Berlin remains in negotiations with Easy Jet and other bidders for other portions of its assets, the newspaper said.

But in bids submitted as part of the insolvency proceeding on Oct.One recent study conducted by investment research company Morningstar, Inc., suggested that American must “take drastic action if it hopes to compete against its larger foes” and that “any scale advantage it may have [once] garnered is gone.” “There was, and is, too much capacity in the industry,” George Hobica, founder of Web-based discount airfare service Airfarewatchdog, said.“And it’s too easy to start a new discount airline.” How is this slew of mergers and acquisitions affecting the flying public, though? Consolidation allows members of frequent flyer programs and loyal customers of a particular airline to travel to more destinations on that carrier, allowing them to stick with a familiar option, earning them miles, or even reducing airfare.Airlines’ motives for entering mergers and acquisitions — known simply as “M&A” in finance — are complex.Airlines usually choose corporate partnerships with other carriers that operate routes that differ from or are complementary to, rather than competitive with, their own.It grants the airline a large presence in Atlanta, the largest city to which Southwest does not yet fly and Air Tran’s principal hub — allowing it to compete shoulder-to-shoulder with resident heavyweight Delta without suffering the growing pains of an airline looking to inch its way into a new market.

You must have an account to comment. Please register or login here!