It’s the peak of the summer travel season, yet airlines are still struggling with not enough business class passengers and killing eachother with fares that are too low. The fact is that there are just too many airlines. Imagine if there were as many car companies as there were airlines. Remember Studebaker, Hudson, and Nash? Well, if economics of scale were applied, we’d see mergers that would strengthen the airline business. United would merge with Air France KLM, American would merge with British Air, Delta would fold itself into Lufthansa.
But these mergers aren’t allowed, because of federal trade regulations that prohibit foreign owned airlines from owning United States carriers. The biggest money is in the long-haul routes, and the fact is that business travelers and cargo provide the profits for most airlines.
Something is going to have to give in the years ahead, and these big mega-mergers are going to have to take place, otherwise we are going to see major bankruptcies. Even with the lower cost of jet fuel, profits are terrible and debt looms around the corner for every major US airline.
Another thing that airlines fear is the pending legislation for carbon tax. As the chairman of Southwest, Herb Kelleher said a few months ago at Travelcon in Atlanta, this bill would cost his airline about $30 billion. As if there is an extra dozen billion to spend on a new tax! There is going to be a day of reckoning coming up soon, and I am sure that the airline lobbyists are gearing up for a fight. Either let them put through huge mergers to keep their planes flying, or many of them will go the way of Nash, Studebaker and Hudson.
