05 August 2008

BA-AA Perhaps Way?

Timot for Virgin Atlantic to dust off its BA/AA No Way stickers.

WSJ and others are reporting that the proposed Alliance between AA and BA to create the world's largest airline (when included with Iberia) is further along and that an announcement can be expected in a matter of weeks.

The BA-AA Alliance in what ever form it takes would be a formidible competitor. It would dominate the UK-US traffic. Reducing the competition to effectively a big 2 (BA/AA/IB and the DL/KL/AF/NW) would force a re-shuffling of the deck chairs amongst the other players. LH would look to make a big effort to acquire an additional US presence and must be looking hard at CO. UAL and US are both probably too sick to warrant much interest.

Interestingly all of the players (CO excepted) have a culture of market dominant behavior. Frankly this merger mania will not result in an improved market position for any of them and would likely result in more shareholder writedowns and still not improvement in the service offering by the respective carriers.

On the positive side - the folks at Virgin America must be throwing wild parties and thanking their lucky stars that this is happening. it will open up opportunities for them in the Domestic US market. Similarly Alaska and AirTran should be happy. It even makes the Frontier business look actually quite attractive.

Of course Mr Oberstar and his friends will probably have something to say about this. I would challenge all of this assumption that merger is the answer to the root cause of the industry's ills.



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