Delta Air Lines CEO predicts airline ''slugfest''
By John Crawley
WASHINGTON (Reuters) - Delta Air Lines chief executive Leo Mullin predicted on Thursday a slugfest between the nation''s biggest airlines and their low-cost competitors in the coming years, but not before one or two of his fiercest rivals possibly disappear.
In an Aero Club speech, Mullin said consolidation was one way struggling hub and spoke carriers like his could meet their ambitious cost-cutting targets and compete with successful low-fare, point-to-point competitors, like Southwest Airlines Inc. and JetBlue Airways Corp..
The situation that almost certainly would result in much needed hub consolidation and, thus the removal of at least some of the excess capacity which continues to cripple the industry -- is successful merger or acquisition activity,
Mullin downplayed any interest by No.3 Delta, considered one of the healthier big domestic airlines, in acquiring a large or small competitor to either dominate the eastern U.S. or expand its reach westward.
He also did not speculate on what combination of carriers might make a formidable company. Some experts believe US Airways has positioned itself as a possible merger partner for a bigger airline since emerging from bankruptcy in March with a sharp focus on its eastern and Caribbean routes and a new emphasis on regional jets.
Since a bid by now-bankrupt United Airlines to acquire US Airways failed in 2001 over competition concerns, airlines have accelerated their participation in marketing alliances that enable them to sell seats on each others'' flights to boost revenue.
Delta is code-sharing with Northwest Airlines Corp. and Continental Airlines. United and US Airways have also launched an alliance.
Like other major carriers trying to shake off the industry''s worst-ever downturn, Delta is seeking cost cuts of up to $2 billion by 2005.
But Mullin said the industry has hit bottom and traffic is beginning to recover. He said the biggest carriers with their schedule frequencies, service and frequent flier perks will be able to afford to charge a 15 percent premium for business customers and still compete with low-cost carriers if they can get costs in line.
At this point, which I think will be around 2006, a real competitive slugfest will occur between the hub-and-spoke airlines and the point-to-point carriers, which should be very much in the public interest, Mullin said.
