Tuesday, April 15, 2008

When Airlines Copulate

Mr. Pessimism here again to express a few words about the merger of Northwest and Delta. I'll be watching the news of this one with a very close eye -- wondering when the announcement of layoffs and closing of hubs will come.

As if this isn't enough, expect United and Continental to start engaging in foreplay in anticipation of consummating their marriage while the merger pimp-in-chief is still around to bestow his blessing.
Other airlines may rush to merge. One reason for the urgency is that airlines want to get their deals approved by the Justice Department under the Bush administration, rather than risk seeing them stall until a new president takes office.

As for expected job losses, do the math:
At the end of 2007, Delta and Northwest employed a combined 89,000 workers. American Airlines, currently the largest carrier, had 85,500. Delta said the combined airline would employ 75,000 people. That number excludes 6,000 people who work at Delta’s regional airline and Delta said earlier that it would reduce employment by 2,000.

Although Delta said no hubs would be closed, that is by no means a statement that there will not be reductions, or eventual closing of hubs. They are going to do what it takes to streamline. The end result might not be very favorable to travelers or employees in the potentially redundant hubs.
Pardus Capital Management, an investment firm, estimated in November that a combination of Delta and Northwest could reduce costs by about $1.5 billion a year, in large part by combining hubs. Delta’s hub in Cincinnati is close to Northwest’s in Detroit. And Northwest’s hub in Memphis is close to Delta’s in Atlanta.

In other words, if I were en employee in Detroit or Memphis, I'd start having trouble sleeping right about now.

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