What happened to consolidation, and what will happen with out it?

[usair_begins_with_u]

The resurgence of the airline industry was supposed to be based on lower costs (labor), and consolidation of operations which would achieve less capacity, less overlap, less competition, and increased profits from economies of scale.

So far, the only significant merger to take place has been AW/US, then everything else has really cooled down. If you think about it, in this time in history, is really surprising given the high level of M&A activity across all industries. Everyday there seems to be a new take over target or acquisition. All the airline talk has come to a screeching halt.

If nothing structurally changes, is there any reason why in the next 5-7 years, or by the next major recession which ever comes first the major airlines will all be facing the same hardships all over again? Is there any reason to be a long investor in the aviation industry?

 

[JMM]

No, no one should ever be a long investor in the industry. It is the most poorly run industry in the country.

 

[allstrike]

Its poorly run today because the people in charge don't have the vision that early pioneers in the industry had.What we have today is opportunist.Not people who want to make it there life's work and success.
Its all faster cheaper vs better stronger.Its volume sales vs commitment to your company and employees.

In a way its Chevy vs Ford.Ford had the volume,Chevy gave a little more luxury,say a inside light for the pax and Ford didnt.

I still cant figure out why we don't board from the back...it was suggested a long time ago.To be the best you have to have the vision,our vision is to be the cheapest...and we aint even that...lol :down:

ps..nice thread thanks.

 

[LongTimeF/A]

OMG.. if the current boarding process doesn't work.. Pax cannot find the correct seat, or figure out which zone they're in... What makes you think boarding from the rear would work better?? Also, the other day going to Madrid, we had 4 people with the same seat... How does that happen?? Sorry this is off topic, JMM hit the nail on the head, "most poorly run industry in the country"

 

[crusher]

It happens because SHARES SUCKS!!!!!!!!!!!!!!!!!!!!

 

[as the prop turns]

Haven't seen that many dupe seats in a very very long time. Now with this piece of sh!t system, we have dupe seats all over the place, Yup, it's definitely because of Shares.

We no longer have airline people running this industry. US Air is particularly a target for these renegades. We are the cash cow for immoral, corrupt and entitled executives.

 

[CynicalResAgent]

Well the possibility of YX and FL merging looks more likely now. I hope they don't have the intergration problems US is having, actually I would prefer YX to remain independant.

I would also not be suprised if either B6 or F9 are takeover targets in the near future but I think most of the majors will remain independant. If US's stock continues to decline than it might make an attractive takeover target but then again who would want to take on the low morale and integration problems, and what value to US bring to the table?

What effect will this have on the industry? Well since the industry is projected to make short term profits I'd guess that the status quo will remain but then again aren't we all just speculating on this website?

 

[Be Careful What You Wish For.]

Who are YX,FL,and B6? Why do you suggest this?

 

[BuffaloJoe]

Who are YX,FL,and B6? Why do you suggest this?

YX=Midwest Airlines
FL=Air Tran
B6=Jet Blue

 

[allstrike]

OMG.. if the current boarding process doesn't work.. Pax cannot find the correct seat, or figure out which zone they're in... What makes you think boarding from the rear would work better?? Also, the other day going to Madrid, we had 4 people with the same seat... How does that happen?? Sorry this is off topic, JMM hit the nail on the head, "most poorly run industry in the country"

Its simple you just yell,hey everyone get on and start seating at the back of the buss.lol Really wouldnt it be easier than boarding front to back,everytime I fly there are people standing in the middle of the Isle looking for a place to put there bag,then they find on and to my dissmay they dont sit down they walk towards the front and say excuse me then head 10 rows forward....lol all the time Im saying what did I just see...lol..

 

[JS]

It could get very ugly, with Chapter 7's rather than consolidation. The last recession was 15 years ago, when the major airlines had pricing power. With Bush racking up debt like my ex-wife, I think we are in for a long and deep recession.

I hope I'm just a pessimist and that I'll be proven wrong, but with oil prices high and no way for them to come down (other than worldwide recession), a huge tax bill to be passed on to the next generation, record consumer debt supported by insane housing prices, a looming Social Security and Medicare crisis with the Baby Boomer retirements, Dow Jones at 13,000 (way overvalued IMHO), and housing prices that have finally stopped entering the stratosphere, I really think we will have two, maybe three, airlines 10 or 20 years from now.

 

[autofixer]

Most of the M & A activity is being financed by hedge funds and private equity funds. They want a return on their investment. Airlines are net-net money losers since the 1930's. No financing, no mergers.

It seems Lakefield was able to get the money to merge these two piles of crap, because the interested partys had more to loose if U and potentially AWA went chapter 7, so they did a risk-benefit analysis and ponyed up the cash.

The industry is purely a cash cow for management and everyone else in the periphery of the industry, ie.,supplyers, finance companys, etc. The industry attracts individuals who would most likely be criminals if they did not have an MBA. It is a legal way to fleace people and has been since the 80's. This is why any time an airline excutive gets anywhere near you, hold on to your wallet.

As far as a recession being near, yea man. Especially if something happens in the oil patch. We are sooo vulnerable to oil supply disruption, it almost borders on criminal--pertaining to our politicians. We could have a depression that would make the '30s look like the good ole days if the overseas oil patch is targeted by terrorists. I am not being an alarmist, just looking at the horizon and it is scary. Maybe I will just bury my head back in the sand like the rest of the American public...it will be okay.

 

[cactusboy53]

No, no one should ever be a long investor in the industry. It is the most poorly run industry in the country.

Yea! Can you imagine how well it would run if we paid the upper level managers more AND gave them obsene amounts of stock options?? Oh wait a minute..........