EVERGREEN, Colo., Aug. 24, 2006 (PRIMEZONE) -- According to a new forecast to be presented in October, mergers between major airline systems would result in higher fares, less service, and materially less employment, without addressing the fundamental challenges facing the industry.
The new Airports:USA(r) forecast indicates that while simplistic "route map reviews" might suggest strong traffic synergies between some airlines, the wider and more complex issues attendant to airline mergers are often overlooked by many financial analysts. "The supposed value in a merger is to gain new operating efficiencies," noted Michael Boyd, President of The Boyd Group, which has produced Airports:USA(r) since 1992. "Merging route systems looks easy. But combining things such as maintenance programs, operations specifications, training curriculums, parts inventories, not to mention union seniority lists, entails enormous amounts of time and money." In addition, he pointed out that the carriers involved would be burdened with merger activities for years, without any immediate material cost advantages, allowing competitors to exploit the situation. "The public should take with a grain of salt any studies or analyses that conclude large mergers are a good thing. They always end up with less -- less flights, less consumer choices, and less economic growth," Boyd warned.
These findings are part of the extensive data that will be presented at The Boyd Group 11th Annual Aviation Forecast Conference to be held October 8-10 in Deer Valley, Utah. In addition to presentations from airline CEOs and other industry leaders, the event provides forecasts of airport traffic and global aircraft fleet demand trends.
Other findings to be discussed at the Conference include:
2007 -- A Banner Year For Comprehensive Network Carriers (CNCs), Clouds for Low Cost Carriers. The Boyd Group data indicate that major airline systems such as American, Northwest, and Continental (formerly referred to as "legacy" carriers) face a robust 2007, even in the event of a moderate economic downturn. "These carriers have built-in 'safety valves' to cheaply cut capacity in the event of a traffic downturn," Boyd notes. Virtually all the CNCs, particularly Northwest, American, and Delta, have significant parts of their fleets that can be parked with limited expense if traffic softens. "LCCs, however, are exposed to a substantial number of new aircraft on order, not to mention a declining number of easy-meat expansion markets."
More Constriction Among Small Jet Lift Providers. The Boyd Group Forecast Conference was the first venue -- four years ago -- to predict today's glut of "regional jets" and a shake-out in small jet providers (SJPs) who operate them. This has now manifested, and with the combination of high fuel prices and a collapsing air traffic control system, this process could speed to a gallop in 2007. "Mesa, Skywest and Republic are in the pole positions to move forward," Boyd said. "How the rest of the players in the group will fare is a jump ball -- who will survive isn't clear."
Air Traffic Growth -- Slow, But There. Barring a major economic downturn, 2007 passenger growth should be in the 1.75% to 2.5% range. "But it will be very uneven across regions and across categories of airports," Boyd said. "The constriction in fleets of regional jets, and the higher costs of their operation, will affect smaller communities. On the other hand, the additional airliners at LCCs will result in some fare wars in discretionary, high-density markets."
The Boyd Group 11th Annual Aviation Forecast Conference is being held at the Stein Eriksen Lodge in Deer Valley, Utah on October 8-10. CEOs and other executives from US Airways, Southwest, Frontier, Northwest, Skywest, and Delta will be presenting their views of the future, as will key leaders from Boeing, Embraer, and the Air Transport Association.
For information on the Forecast Conference, and to register, log on to www.AviationPlanning.com/Forecast2006.htm. Or call (303) 674-2000.