Airline merger may soon impact United

While Delta Air Lines Inc. and Northwest Airlines Corp. announced their intention to merge late Monday, industry experts and unions turned their eyes toward Chicago-based United Airlines.

UAL Corp. Chief Executive Officer Glenn Tilton has long advocated consolidation in the airline industry, and many Wall Street analysts have touted Continental Airlines as a prime merger partner for United. But whether United merges with any airline, let alone Continental, remains unclear.

"There is no compelling issue with a Northwest-Delta merger that would force a United merger," said Mike Boyd, airline analyst and principal of The Boyd Group of Evergreen, Colo. "The lightweights will mention Continental, but that's a long shot. Further, the belief that no airline 'wants to be left without a partner if mergers take place' is really foolish. There's got to be financial and revenue reasons to merge."

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Whether that consolidation will ultimately help either the consumer or United's future is anyone's guess.

"In the short term, such mergers would be a shot in the arm for United and the rest of the industry," said Brian Nelson, airline analyst with Chicago-based Morningstar Inc.

Greg Davidowitch, Association of Flight Attendants-CWA United Airlines Master Executive Council president, said his members are ready to oppose any business combination that could harm flight attendants. The group represents about 55,000 flight attendants, including 17,000 at United.

"We will not tolerate any transaction that serves to interrupt, impede or otherwise delay our efforts to secure meaningful increases to our compensation and quality of work life," said Davidowitch. "Mergers are inherently risky business. If the industry is to consolidate successfully then the needs of flight attendants at United Airlines and the communities in which we live and work must be addressed."

Davidowitch said few airline mergers work. "We have studied numerous scenarios in order to be prepared for any contingency," he said. "Our analysis of every imaginable combination confirms that no consolidation scenario can be successful without the support and dedication of the front-line workers."

The Delta-Northwest merger will have "virtually no impact on United because the effects on frequent flyer loyalty have already occurred with the formation of the Skyteam Alliance that includes Northwest, Delta and others, said Robert J. Gordon, professor of social sciences in the economics department at Northwestern University.

"For the Chicago-area United customer, it's all good news, as there will be many more opportunities to earn and spend frequent flier miles," said Gordon. "(There will be) little or no impact on fares or flight frequencies at O'Hare."

Gordon also said United and Continental "seem poised to complete their merger negotiations once Northwest and Delta announced."

"What has not been decided, or at least not announced, is where the corporate headquarters would be," Gordon said. "It would be a big blow to Chicago if the headquarters moved to Houston. I assume the surviving name would be United."

During a speech April 3 to the U.S. Chamber of Commerce, United's Tilton said airlines should speed-up consolidation and change the industry if they expect to survive and serve passengers globally.

"The negative outcomes commonly associated with mergers -- such as reduced flights, customer service cuts and job losses -- are industry realities today and are, in fact, exacerbated by a fragmented market dealing with the unprecedented price of oil," Tilton had said. "These challenges can be overcome in the long-term by creating a sustainable domestic industry. Consolidation will create stronger global networks to connect U.S. businesses to the world; access that makes U.S. commerce more competitive. As to smaller markets in the U.S., there is no evidence they will be harmed. In fact, we depend on them, and they depend on us."