Why Delta Shouldn’t Pursue a Merger with Northwest Airlines

Published by AirlineFanatic | Filed under legacy carriers

There hasn’t been much merger talk in the airline industry since US Airways attempted a hostile takeover of Delta while they were still in bankruptcy. That has fallen by the wayside now though, and this time discussion is ramping up around the once down and out carrier Delta and its possible merger ideas with Northwest (or should I say Northworst?). Business Week is the latest to comment on this, providing a pretty good argument in favor of consolidation. I also feel consolidation between some of the major carriers would be great for the industry as a whole, though it would be bad for passengers.

Having said I’m in favor of airline consolidation, why does the headline say Delta shouldn’t think about going through with this? For many reasons, first and foremost being the fact that combining two mediocre airlines does not automatically mean they will come out on the other end being a great airline. This is the same kind of ill fated logic that brought America West and US Air together several years ago, only to have the combined carriers place last on the Department of Transportation’s complaint list. As someone who has had the unfortunate pleasure of flying on Northwest, I can safely say their customer service and passenger experience ranks among the worst in the entire industry, something Delta would only inherit in a merger.

Speaking of passenger experience, Northwest throws up another giant STOP sign with their aging fleet of over 100 DC-9s. The average age of this group of planes is an astonishing 35 years old. Needless to say the passenger comfort, cabin noise, and environmental standards of these things aren’t what they are today. Any suitor for Northwest would be forced to put up a lot of cash for planes that actually detract from passenger’s overall experience. Not that Delta is the poster child for new planes and clean interiors, but why make your fleet older than you have to?

One of the biggest incentives for a Delta-Northwest merger would be reduction in capacity in the domestic market, which in turn means healthier revenue numbers as prices go up. This drop in capacity wouldn’t happen to any great extent in this merger however, as Delta’s and Northwest’s route structure are largely mutually exclusive. Delta has major hubs in Atlanta and Cincinnati, while Northwest works out of Minneapolis, Detroit and Memphis. Reductions in point to point departures only leave more room for the low cost carriers to take more market share from legacy carriers. Internationally, Delta would gain an extensive network in Asia, which would complement its own network in Europe and make it a truly global airline. Delta has already won approval to start Atlanta-Shanghai service however, and is continuing to rapidly expand its own international offerings. Delta is already in a headlong rush to add its own international service, and so will probably catch up with stagnating Northwest before too long.

Delta should definitely be interested in industry consolidation, but only if doing so would provide any benefit to the bottom line. In my opinion swallowing up Northwest would produce bigger headaches than efficiencies. Instead Delta should take a look at an airline that isn’t as ancient and customer unfriendly as Northwest, such as ATA or Midwest.

Technorati Tags: America West, delta, Northwest, US Airways

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