21 January 2008

Control? What is the definition of control?

According to an evaluation published by USA Today and the FT - the results of a merger between DL and UAL would be control of approx 25% of the US Domestic lift. If DL merges with NW the number falls to 22%. If UAL and CO merge then the number is closer to 23%. This could then force AA to merge with US which would be even higher. Thus creating a big 3 airlines group.

In any case such a consolidation would result in significant oligopoly power for the surviving companies.

I note that there has been a long held law that prevents foreign ownership control of ANY US carrier to exceed 24.9%. So if we apply such logic control is defined by this number.

The idea that a small number of airlines could hold the rest of the country to ransom remains a very real threat.

So again I will say - JUST SAY NO to this idea of the mergers. I hotly dispute Gordon Bethune's position - much though he is to be admired for turning around CO. IE that the mergers benefit the consumers of America.

Follow this wisely.

If you ever want to see the impact of consolidation - may I suggest you ask people who live in 2 communities: St Louis and Pittsburgh.



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