Rumors Fly of Airline Mergers

Older airlines -- the so-called legacy carriers -- are the primary subjects of speculation.

"I think consolidation is inevitable," said Jared Blank, publisher of Online Travel Review, an airline industry news website.

"Anytime the airlines' financial situations improve they tend to get a little more aggressive," he said, "and after a few good months I'm not surprised that these rumors are coming up."

No one has a bigger stake in possible consolidation than business travelers.

Among the possible changes to watch for: Higher fares, expanded routes, reduced capacity with fewer flights and seats, a more stable industry and improved service.

Recent speculation has revolved primarily around two possible pairings, one between Delta Air Lines Inc. and Northwest Airlines Corp., which are both struggling through bankruptcy, the other between UAL Corp.'s United Airlines and Continental Airlines Inc. Analysts say the airlines within each rumored pairing are potentially compatible because of complementary route networks.

Delta is the largest carrier for transatlantic travel, after recently surpassing British Airways, and is strong on the East Coast and in Europe, while Northwest is strong in the Midwest and in Asia.

United is strong in the Western United States and Asia, while Continental is strong in the South and Latin America. On the surface, at least, these marriages would appear to be sensible. But that doesn't mean they will necessarily be happy ones for travelers.

Should consolidation occur, one effect probably would be higher fares.

"I have yet to see the elimination of competition bring the price down," said Minneapolis-based Terry Trippler, a longtime Northwest Airlines watcher and airfare analyst for MyVacationPassport.com.

The upside for travelers would be increased stability in the air transportation system, Trippler said, with the prospect of fewer bankruptcy cases and less labor strife.

Another major effect on consumers could mean a reduction in capacity; this means fewer flights, fewer seats.

"I think there's a lot of desire among the fans of the legacy carriers to reduce capacity," said Michael Roach, a principal in San Francisco-based Roach & Sbarra, an aviation consulting firm. Roach was the co-founder and first president of America West Airlines and a former senior executive with Continental.