Major Airline Mergers in the Works

Monday, December 9th, 2008

A series of major airline mergers could be taking place in the near future.  Qantas recently revealed that it is in merger talks with British Airways, which has also been courted by American Airlines.  Major US carriers Northwest and Delta merged recently.  Many industry experts predict a wave of mergers or take-overs in the near future as airlines continue to recover from fuel costs and struggle with low passenger numbers brought on by the poor global economy.  

British Airways has also been in talks with Spain’s Iberia Airways about some sort of merger or co-operative agreement.  

BA claims that the merger with Qantas won’t be the same as the Northwest/Delta merger.  The two companies will remain separately listed on stock markets but will act as a single, global operation.  There are potential pitfalls to the deal.  By Australian law, Qantas, a national carrier, must be at least 51% Australian owned.  This law is for taxation purposes.  Qantas either has to convince the government that its merger ideas will not harm their bottom line or else convince BA that a 51% share has to remain in Aussie hands, rather than the 50-50 deal that a merger might suggest.  BA ran into similar problems in merger talks with American Airlines.  The US government decided that only 25% of US-based airlines can be foreign owned.  

What does all this mean for fliers?  Right now, nothing.  Long haul travelers might benefit from having a single airline with a global network.  However, mergers also mean less competition.  Though low-cost carriers will keep prices low on certain routes, other routes could become dominated by a single airline and prices for that particular route could skyrocket.  

One thing is for certain: the airline industry will continue to evolve.  The latest round of merger talks is only the beginning.  Low-cost carriers have proved that their business models are successful. 

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