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Further airline consolidation not likely, predicts Boyd

Airlines are more likely to focus on strengthening alliance ties rather than forge sweeping merger agreements, despite SkyTeam alliance members Delta Air Lines and Northwest Airlines' pending tie-up, outspoken industry consultant Michael Boyd predicts.

"We don't see any major corporate consolidation going forward, alliances, yes, but consolidation [no]," said Boyd today during his firm's annual aviation forecast conference in Aspen.

With respect to the Delta/Northwest merger, he says, those codeshare partners "are like two people who have shacked up for four years and have decided to get married". As such, the arrangement will not have a tremendous impact.

He notes that since there is very little overlap of the two carriers' networks, there is "no real downside" to the arrangement. "It's more of the same and the only one who will be a winner is Sherwin-Williams painting airplanes."

Boyd also paints a gloomy picture of the US aviation system as a whole, saying the airlines are largely dysfunctional. "We see no growth whatsoever in the next two years" for comprehensive network carriers, he says, noting that the company forecasts a 10% reduction in capacity by the end of 2009. "If demand falls faster than that, it [capacity] might drop faster than that."

Carriers operating on the periphery as well as certain charter operators and freighter operators are going to continue to be challenged, and could fail like Aloha Airlines and ATA Airlines before them, even if oil is at $90 a barrel, says Boyd.

Additionally, labour relations will be a hot-button issue going forward as employees refuse to accept further concessions in light of the sometimes massive payouts given to CEOs in recent history. "The rank and file is not going to put up with it. The rank and file will say: 'we will leave this bargaining table with a strike poster'."

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