A Wall Street analyst is predicting that none of the proposed US domestic airline alliances will be approved by the Department of Transportation because of the unfavourable environment in Washington DC and concerns about competition.
Candace Browning, an analyst at Merrill Lynch in New York, points out that the DOT was expected to respond to the proposed alliance of American Airlines and US Airways by early July, but that the proposal has so far met only silence. Two other alliances are also being proposed; between Northwest Airlines and Continental Airlines, and between Delta Air Lines and United Airlines.
Speaking at the National Business Travel Association's convention in Orlando, Florida, in August, Browning said she believed the silence could prove ominous for the airlines. 'If the government does not want it to happen, it will not happen. And the government does not want it to happen.'
The NBTA has produced a white paper on alliances, both domestic and international, that weighs up their merits and debits for the business traveller. The chief concern of the report is that reduced competition will mean higher ticket prices. 'The airlines become more dominant in their fortress hubs and over point-to-point routes where their pool partner formerly offered one-stop or connecting service,' it says. 'They jointly control greater market share overall. This reduces competition and, absent competition, puts them in a seller's market.'
The NBTA says, however, that the accumulation of extra frequent flyer miles would appeal to many business travellers and says international codeshares and alliances would improve services.
Source: Airline Business
