Airlines pressured to find merger partners

by Jessica MCILHINNEY on September 29, 2010

The awaited merger of United Airlines with Continental Airlines and Southwest Airlines’ arrangement to purchase AirTran Holdings puts new pressure on large-name operators without a merger partner to find.


For American Airlines, who lost the title of largest airline in the world after the merger in 2008 between Delta Airlines and Northwest Airlines, the future is not too promising. Experts say American requires a merger partner, as, without one, the airline will lose a competitive edge.


In the corporate travel marketplace, American now faces the market from the bottom as opposed to the top of the top three airlines, a compromising position for any company looking to move up in the rungs.


Business travellers who provide the bread and butter for all top airlines in the U.S.A. naturally gravitate to those carriers who offer extensive route networks. These days, American is unable to make these claims.


In contrast, Northwest and Delta as well as United and Continental have favourable stories and pitches to acquire revenue in their extensively served markets. Both have a mighty leading edge.


Dallas-based American has said they have confidence in its existing international network to attract premium travellers and does not require a merger to thrive or survive.


Gerard Arpey, American’s Chief Executive has said that the importance lies in network breadth, which the company has in abundance. According to Arpey, American can approach almost any corporate account and provide offers for convenient access to those markets important to them.


In the next few days, United Airlines will close the $3.17 billion all-stock buy-out of Continental, forming the largest carrier in the world. While Southwest announced on Monday that it will buy AirTran for more than $1 billion to expand the company into lucrative markets on the East Coast of the U.S.A.



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