Airlines One Size Fits All

        Mergers of companies have become a common theme within any industry. With a sluggish economy and little growth it has been a struggle for many companies to remain profitable or to overwhelming to efficiently adapt. Aviation has been an industry that has seen a great amount of mergers leaving a small competitive market. With the smaller market it makes it increasingly difficult for new companies to establish themselves. There are some positives and some negatives that comes with mergers, that effect both the company and their customers.

            Mergers can have a great effect on the customer, one of the most obvious being one less option for customers to select from leading to less competition that can lead to higher ticket cost. Most are under the impression that due to the size, competition, profitability of the company because of the merger that cost for tickets will decrease, however because the market is so small and they may be one of a few options or the only option they can increase the ticket price on those routes to an extreme amount. Profit-hungry carriers undoubtedly will push fares as high as possible if a shortage of competition on some routes lets them get away with it (Newman, 2013). If customers need to get to these destinations they will be willing to pay for the conveyance rather than the affordability. In recent years even with other mergers there has been raised fares, imposed new and higher fees, and reduced service. On the other hand, customers that are not in need of convenience or time will look for more budget friendly options. There is a large misconception that because of the increase in fleet size there will be more options for routes and will be easier to fly direct to many stops. Yes, the fleet size will increase and yes there will be more times to available for certain routes, the ones that are most profitable is most likely you will see a higher availability for. Smaller routes or less used routes will still remain the same cost if not higher, known that only a small amount of people will use these routes the airlines will increase the cost for these flights knowing that these people are dependent upon these flights at have a limited availability. Just because the size of the company increases a great amount does not mean the cost will go down it will most likely go up for these massive companies to remain as profitable as possible.

            Looking on the other side of mergers it can help a company if they are in financial in trouble. Most mergers that occurred after one company declared bankruptcy. many times these companies that merge are having trouble recovering from bankruptcy or having trouble maintaining their own company. Many of these struggling companies look to mergers as a valid option as an opportunity to grow. Merging allows these stagnate companies to improve and upgrade their product and operation. The companies can now do things they were unable to do before such as; upgrade to newer aircraft, upgrade current aircraft, integrate new operational procedures, and newer technologies to help the flow of operations. All those bankruptcies allowed the airlines to trim an excess supply of jets and cut labor costs that got inflated during the late 1990s (Newman, 2013). Mergers give these companies a chance to reset, take on a new direction, and changing the mindset.

            One of the most difficult decisions when merging is deciding the seniority list. It is an issue that has many companies battling for years after mergers trying to decide what is best for their employees. Companies trying to gain much control with providing their employees with the best possible spot on the seniority. The seniority list determines not only the pay rate of the pilots but the benefits and rewards that comes with jobs, having more say on your schedule and routes. Many mergers split the seniority into sections providing X amount of employees to have a section on the list, example A company gets top 20 spots on the list and company B gets the next 20 spots, so on so forth. This can cause animosity between workers within the work place. Your could have a worker that before the merger was within the top 5 on the seniority and after the merger will only be able to be no higher than 20 on the list, this is a large down grade and can be discouraging to someone that has worked hard to reach that point in their careers. Personally I believe that the best course of action when merging seniority list is to take both list start from the top and insert every other from the top of each list, example: First spot Company A, Second spot Company B, Third spot Company A, etc... This would provide a more even and balanced list that allows both companies to have opportunity on the higher end of the list. Determining who from what company goes first could be based off of total flight time, years with their respective company, type of aircraft, types of ratings and certifications, and routes being flown, the overall value of those pilots. After choosing the first person on the list everyone after will be inserted on a every other method. Some companies seniority list are based off not only hire date but the aircraft they are flying in, the same concept can be applied per aircraft. 

         All mergers must go through Justice Department’s antitrust division in the approval process  of combining these companies. According The United States Department of Justice the mission and purpose of the antitrust division is to promote economic competition through enforcing and providing guidance on antitrust laws and principles. The goal of the antitrust laws is to protect economic freedom and opportunity by promoting free and fair competition in the marketplace (USDOJ mission, 2013). The antitrust division is to protect the consumer and help preserve the competitive nature in all markets within the United States. They encourage a competitive market that helps lowers prices and provides quality of products. This division help prevent monopolies from taking place and controlling a particular market. They are able to do so by filling for a criminal law suit that seeks a court order and can lead to no approval, lager fines, or even jail time in some cases. The USDJ also provides guidance for companies, assisting them with structuring and organization so they remain within accordance of the law. The USDJ has stalled the merger between American Airlines and US Airlines due to the size of both companies, if the merger happens they will be the world's largest airline. Christopher Elliott from Seattle Times states if the merger were to happen "the new airline would control 69 percent of the takeoff and landing slots domestically at some airports. That would translate into higher prices and fewer choices, the government claims." In the same article it says that those route that will be owned by those companies are tens of billions of dollars in revenue annually. With some routes reaching up to two billion dollars of revenue each annually these routes would be greatly controlled by these one airlines allowing them to raise the fees even higher (Elliott, 2013). Delta, United, Southwest and the new American will control about 85-88 percent of all domestic air travel (Newman, 2013). American and US airlines currently have 12 of their non-stop routes overlap directly, the main reason for the action taken by USDJ is simply due to the competition that it would leave for the market (Saporito, 2013). 

            Merging cannot only lead to less options for the customers but can leave less options for future employees. Instead of having 10 different airlines to select from that now there will only be a 4 to choose from. With the limited number of airlines leads to a difficult job search with now hundreds to thousands of applicants now all applying to the same place. This can lead to a very competitive market for applicants and could cause a even more stagnate hiring due to the large number of applicants and the limited option to select form.   

            I personally do not like the idea of merging from a competitive standpoint and what it can lead to. Merging lessens the competition, which in turn can lead to less innovation throughout the market, with the only amount of innovation coming when trying to save the company money. Not that saving money is bad but does not infuse the desire to create or invent something that can help other areas or just make a better overall product or service. Merging can lead to a standardization of products and services, when thinking of this it reminds me of movies that were made years ago when they try to create the future and what they thought it would look like: All the same cars, clothes, houses, phones, and airplanes. A one size fits all monopoly, a standardization that limits the options to the point where there is no options.

       

References

Elliott, Christopher (2013, August 20). Blocking airline merger is mostly good news for passengers. The Seattle Times. Retrieved November 10, 2013, from http://seattletimes.com/html/travel/2021649727_airlinemergertroubleshooterxml.html

Newman, Rick (2013, February 14). How Airline Mergers Saved an Industry—and May Even Benefit Fliers. Retrieved November 10, 2013, from http://www.usnews.com/news/blogs/rick-newman/2013/02/14/how-airline-mergers-saved-an-industryand-may-even-benefit-fliers

Saporito, Bill (2013, November 9). The Sky-High Price You’ll Pay for Airline Mergers. TIME. Retrieved November 10, 2013, from http://business.time.com/2013/11/09/the-sky-high-price-of-airline-mergers/

Department of Justice (2013, September 5). Case 1:13-cv-01236-CKK. Document 73. Retrieved November 10, 2013, from http://www.justice.gov/atr/cases/f300400/300479.pdf

The United States Department of Justice (2013). Retrieved November 10, 2013, from http://www.justice.gov/index.html