This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Airline Mergers Not Always Great News

WASHINGTON, Feb. 15, 2013 /PRNewswire-USNewswire/ -- National Press Club -- With recent news of a merger between American Airlines and US Airways, the airline industry seems to be headed toward four "super-airlines" dominating the market. Recent mergers have consolidated brands and routes across the country, but passengers do not benefit.

For the past three years of reports, US Airways has consistently ranked higher than American Airlines, based on the annual Airline Quality Rating www.airlinequalityrating.com conducted by Dr. Brent Bowen of Purdue University and Dr. Dean Headley of Wichita State University.

Recent airline mergers may jeopardize gains in industry performance because it can take years for two airlines to successfully synchronize their systems and culture the researchers confirm.

American Airlines planned merger with USAirways will create an oversized bastion of mediocrity that will serve the public in far poorer fashion, according to Dr. Brent Bowen, Purdue University professor responsible for the annual Airline Quality Rating (AQR) report.

Bowen says every merger over the past 25 years has resulted in each of the two airlines significantly declining across the board in key performance benchmarks such as late flights, lost luggage, and reduced customer satisfaction.

"There will be no benefits to performance and consumers will not see better quality," Bowen said. "Employees of both airlines will be unhappy and destabilized for an extended period."

USAirways has consistently outscored American over the past five years in the AQR but the smaller partner will not have the heft to bring up the performance of the larger company during the inevitable clash of corporate cultures and technology, Bowen said.

In the 2008 AQR report, American placed 9 th overall. Since then, their performance in the rankings has steadily worsened, while US Airways' ranking has improved.

Following the United-Continental merger, the DOT reported that customer complaints increased, as did lost baggage. Headley suspects that the company's $3 billion merger with Continental Airlines is to blame. "Anytime you have two airlines trying to combine, one of those airlines is going to have a period of decline."

Along with performance fluctuations, mergers can have severe consequences for employees. Concerns about layoffs, future salaries, seniority, and pension plans can drive tension that damages employee morale and lowers the quality of customer service.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs