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Is getting bigger the way to fly?

Jeremy Hobson Apr 15, 2008

Is getting bigger the way to fly?

Jeremy Hobson Apr 15, 2008


Kai Ryssdal: Other businesses that’re trying to pass on costs? Airlines. It’s not getting any cheaper to fly and yesterday’s merger between Delta and Northwest probably won’t help passengers any. But is bigger necessarily better for companies in a struggling industry?

From Washington, Jeremy Hobson has that story.

Jeremy Hobson: At this morning’s press conference in New York, Delta and Northwest executives were talking like they just got upgraded to First Class.

Delta CEO Richard Anderson says the new airline would be the world’s biggest and would be able to navigate turbulent economic cycles and rising fuel prices.

Richard Anderson: What is really unique is that we’re creating an airline that can effectively compete and win in the global marketplace.

But Seth Kaplan of Airline Weekly says this isn’t about cost-cutting.

Seth Kaplan: In the airline industry, it’s so labor-intensive that serving twice as many people takes about twice as many employees, so the idea that this is going to help on the cost side in this industry is very dubious.

Kaplan says getting bigger is about revenue and pricing power. Fewer competitors don’t make fuel any cheaper, but it could be easier to raise ticket prices when fuel gets more expensive.

And there’s another advantage, says Professor Alan Bender at Embry-Riddle Aeronautical University: greater appeal to the business travelers who have one thing on their minds:

Alan Bender: Who’s got more destinations? Who’s got more flights? And, you know, in that sense, the bigger the better.

Bender says those business travelers can generate 70 percent of the revenues for the big airlines, so merging to create a worldwide network of routes is a no-brainer.

Bender: I think the question is why it’s taken so long, and again, I’m not saying it’s the best thing for the public.

That will be left up to federal regulators to decide, probably in the next few months.

In Washington, I’m Jeremy Hobson for Marketplace.

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