Airline mergers likely to bring changes

 
Published3/8/2008 10:57 AM

It looks like some of the major airlines are seriously considering mergers, and this begs the question: Will it bring higher fares?

Here's our take in Q&A form:

 

Q. Will mergers cause a huge spike in airfares?

A. We're not so sure this will happen.

First, let's admit that, adjusted for inflation, airfares are incredibly cheap. Twenty years ago, you would pay more to fly in inflation-adjusted dollars than you do now. According to the Air Transport Association of America (www.airlines.org, admittedly an industry trade group), the inflation-adjusted cost of domestic air travel has dropped by 50 percent since deregulation, from 8 cents per mile to 4 cents per mile today, in 1978 dollars.

When American Airlines (www.aa.com) bought TWA, fares increased for a while on certain routes, but then we saw the creation and expansion of discount carriers, such as AirTran (www.airtran.com), ATA (www.ata.com), Frontier Airlines (www.frontierairlines.com), JetBlue (www.jetblue.com), Skybus (www.skybus.com), Southwest Airlines (www.southwest.com), Spirit Airlines (www.spiritair.com) and Virgin America (www.virginamerica.com). Probably the same thing will happen again.

If there's a Delta Air Lines (www.delta.com) merger with Northwest Airlines (www.nwa.com), Atlanta fares will be kept low as long as AirTran keeps flying. Fares into and out of Minneapolis, already high because that airport is a Northwest "fortress hub" with little low-cost carrier competition, mainly from AirTran, probably won't go much higher.

Detroit is also a Northwest hub, but perhaps the combined airline will close hubs (for example, it might not want to keep both Cincinnati and Detroit) and that might open the way for a discount airline, such as Southwest, to take over gates and landing slots in the closed hub(s).

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Although it's a small carrier, Sun Country (www.suncountry.com) keeps Northwest on its toes in Minneapolis. Perhaps with the merger, Delta will have to give up its (admittedly few) gates and landing slots in Minneapolis and hand them over to a discount carrier.

What we won't see anymore are those crazy retaliatory, tit-for-tat unadvertised hub airport fare wars. That's when Delta would lower fares out of Northwest's hubs to ridiculously low levels and then Northwest would return the favor out of Delta's hubs a few hours later. This sort of irrational behavior might be history, so we're not going to see as many unadvertised fare wars.

Q. What about other costs associated with flying, such as extra fees?

A. Airline fees might indeed increase. For example, United Airlines (www.united.com) is one of the few airlines that refunds, without charging a fee, when you buy a fare and it goes down in price before you fly (in the form of a voucher good for future travel within a year).

Continental Airlines (www.continental.com), however, charges a $100 fee in such a scenario. We wouldn't be surprised, should the two airlines merge, if the Continental fee prevails. Conversely, Continental would probably adopt United's $25 second-bag fee.

                                                                                                                                                                                                                       
 

Airline fees, for everything from bringing a pet into the cabin to rebanking frequent-flier miles, just keep on going up and up, and often add a surprising amount to the cost of flying. It will also be easier to push through fuel surcharges as oil prices continue to increase.

Q. What about international fares?

A. Luckily, there isn't much overlap between Delta's and Northwest's international routes. Delta flies mostly to Europe, and Northwest is big on trans-Pacific routes. Plus, the new "open skies" agreements, which allow foreign airlines more leeway to fly between the U.S. and foreign airports, might keep fares from spiking too terribly, and might also keep service levels from plunging.

Q. Will other airlines merge if Northwest and Delta combine?

A. Most likely. We might see Continental merge with United, and perhaps US Airways (www.usairways.com) would buy a smaller carrier, such as AirTran or Frontier. American, which bought Midway and TWA at the end of the last century, might also buy another small carrier, but antitrust concerns would probably preclude it from swallowing up a larger player.

Q. What will happen to my frequent-flier miles?

A. If you have 10,000 miles on Northwest and 15,000 on Delta, you'll have 25,000 combined on Delta (assuming that the new airline is named Delta, which is most likely). No miles will be lost.

However, and it's a big however, we wouldn't be surprised if the airlines, post-merger, increase the number of miles required for free trips. After all, if there are just three or four major carriers, who are you going to complain to?

San Francisco hotel extends package

The newly renovated Hyatt at Fisherman's Wharf just extended validity dates for the hotel's popular Spring Fever package.

Priced with value in mind, the package includes a newly renovated guest room for two (add-on rates available for families) and a packet of California poppy seeds so guests can plant their own memories of their whimsical getaway once they return home.

Rates start at $169 per night and are valid through May 31.

Located across the street from the Mason/Powell Cable Car line, nearby attractions include Alcatraz, Pier 39, The Cannery, Fisherman's Wharf, Golden Gate Bridge, Bay Cruises, Coit Tower, Lombard Street, Ghirardelli Square, Aquarium of the Bay and North Beach.

Guest services and amenities include Wi-Fi service throughout the hotel, 24-hour automated business center, complimentary transportation to the Financial District, newly renovated 24-hour fitness center, outdoor heated pool and Jacuzzi, and pool tables at Knuckles.

For reservations and information, visit www.fishermanswharf.hyatt.com or call (800) 233-1234.
Reach George Hobica at hobica@gmail.com, Kim Liang Tan at KimLiangTan@aol.com
or log on to www.airfarewatchdog.com.

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