Merger Mania

Delta/Northwest Merger

$127.01. That is the price today for one barrel of oil. Only 5 short years ago oil was down in the $20 something dollars per barrel range. This affects our lives as our automotive gas prices increase but for me and the other tens of thousands of airline employees this affects everything. For the average sized airline each $1 swing in the price of a barrel of oil there is roughly a $40,000,000 annual impact. For large airlines the impact is as high as $80,000,000 annually. Five years ago labor was the biggest expense to the industry, but after 40% pay cuts to keep the airlines alive, fuel now tops the list of biggest expense to the airlines.

Oil Skyrocketing

The first quarter this year for the airlines presents a very unique situation. All of the major airlines carriers, including even Southwest from what I understand, are reporting a loss. This requires drastic changes in the industry for the airlines to even survive. I want to inform the public a little what you must expect.

First, higher ticket prices. There must be a fuel surcharge or they will all go bankrupt.

Second, Fewer options for flights. Cutting back flights to make sure load factors increase.

Third, fewer airlines. That’s right, mergers. When airlines merge, costs are cut and routes are duplicated which allows consolidation of airplanes and scheduled routes.

Liberals applauding themselves

The days of $59 one-way tickets are probably over and flying may go back to the way it used to be, more of a luxury than a privilege. If you want to know who is to blame for all of this let me give you a brief history. In 1978 Senator Ted Kennedy decided that regulating the airlines was no longer a good idea and cut the apron strings overnight. This was called the Airline Deregulation Act, and President Jimmy Carter was foolish enough to sign this worthless document. No airline had ever learned to operate as a business since the whole system had been run under the government since it’s existence in the 1930s. All of a sudden there was competition in the airlines. Setting fares, routes, and formation of new airlines. Now, I promote Capitalism, but when you are so lazy that instead of figuring out a solution to deregulating the airlines you decide to just cut them off in one day, I have a problem. The airlines never recovered and here we are today with it almost impossible to control oil prices and run a profitable airline.

We’ll see how much competition there will be in the next 5 years when there may only be one or two airlines to choose from. Way to go Ted. Don’t let the media tell you the fault of the failing airlines is because of 9/11 or the Bush Administration. In the 27 years before airline deregulation, no airline went bankrupt. Since 1978, 160 airlines have come and gone. In the last quarter-century, the rate of bankruptcy among air carriers has been as much as 10 times higher than that of the general business community. If you want to keep you accommodating way of life, you better hope that whoever sits atop Capitol Hill has a good economic background and knows what to do with this mess.

Good Article Here