Friday, November 17, 2006

US Airways-Delta Merger Proposal and News Roundup

US Airways-Delta Merger Proposal

The surprise bid that US Airways launched for Delta this week may mark the beginning of overdue consolidation in the US domestic airline industry.  However, unlike the end-to-end merger of America West and US Airways, we think that the potential for antitrust problems with this merger proposal is much greater.  The largest antitrust problems may be with the airlines’ overall presence in the Southeast (DL hub at ATL, US hub at CLT) and particularly with smaller markets in the Southeast where service is predominately by the two carriers (e.g. Huntsville, Alabama).  Likely there will also need to be some divestiture of shuttle assets in the Northeast as the new Delta would only face American’s RJ operation as competition on these routes.  Given that Delta has exclusivity for presenting a reorganization proposal to the bankruptcy court until February 2007, we would not be surprised to see competing bids for the airline emerge.  Both United and Northwest would make an excellent fit with the Delta route system as each of the carriers are strong in the Pacific, a key weakness of Delta’s international route system (DL is strong in Europe and to a lesser extent Latin America).

AP article discussing merits of plan and antitrust issues

Houston Chronicle article focusing on Doug Parker (US Airways' CEO)

Reuters article on impact on regional airlines

Reuters article on United potentially bidding for Delta

New York Times article outlining deal

UK CAA Report on "No-Frills" Airlines

A report published on November 15 by the UK Civil Aviation Authority examines the impact that no-frills airlines have had on the the airline market, on passengers and on broader society.  One of the most interesting findings of this report is that the annual average rate of growth of short-haul traffic is similar to that before the arrival of no-frills airlines.  The study found that no-frills airlines have simply taken market share away from incumbent carriers.  These findings seem to run contrary to the popular wisdom in Europe that no-frills airlines have had a negative impact on the environment by stimulating new demand for air travel.

Press release about study

Full study

EU Plan To Include Airlines in Emissions Trading Scheme

A leaked draft proposal from the European Commission this week shows that the Commission intends to include aviation in the EU ETS scheme and that the plan would apply to all airline flights arriving or departing the EU.  The official draft proposal is expected before Christmas. discussion

Incoming House Transportation Committee Chair Wants "Rethink" of DOT NPRM on Actual Control of US Air Carriers

On Tuesday, Rep. James Oberstar reaffirmed his opposition to the US DOT’s NPRM on actual control of US air carriers, making it less likely that the DOT will issue a final rule in time for the EU Council of Transport Ministers' meeting in December 2006.

FT Article by Doug Cameron

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