Airlines Consider Worldwide Mergers

Pan-continental airline mergers seem to be creeping more and more into the airline industry’s horizons, now with the CEP of the International Air Transport Association saying that consolidations around the globe are the next step.

Giovanni Bisignani, CEO of the International Air Transport Association, told the Dow Jones Newswires that airlines would need to consolidate beyond national borders to maximize margins in the future.

He also bemoaned the current restrictions, which exist in the U.S. and abroad, that prevent foreign airlines from owning over 49 percent of domestic carriers.

Airline mergers in the U.S. have been profitable for the airlines, but somewhat controversial among consumers who often wind up with fewer flight choices.

Domestically, Delta has completed a merger with Northwest and United Airlines is in the process of merging with Continental, along with other major-carrier combinations still underway.

Most domestic airline CEOs are of like mind with Bisignani, saying consolidations result in higher margins.

In Europe, Deutsche Lufthansa AG, the German airline that accreted with three airlines last year, officially reported that they would be on board with the trend too.

Bloomberg reported that Stefan Lauer, a Lufthansa executive, said mergers were very likely and that they were an exciting prospect for the airline industry.

Industry analysts point out that the mergers will help airlines stay afloat and could lower prices for larger companies. However, it also reduces competition as there are fewer players in the game.

Shorter flights either atrophy or become more expensive as the larger companies look more toward increasing longer, more popular flights.