With the recent flurry of airline mergers between Delta & Northwest, AirTran & Southwest, and United & Continental, airline industry analysts are now speculating that American Airlines may be the next to merge in order to compete with these mega-carriers. But with who?
According to a Forbes blog post, analysts from Morningstar believe that American Airlines “needs to make a big splash” to remain a player in an increasingly competitive market.
“Once the industry’s largest carrier, [American Airlines] is now the third-largest…and any scale advantage it may have garnered is gone,” the Morningstar analysts write. “Ironically, AMR is at a substantial disadvantage, given that it steered clear of bankruptcy during the recession,” [Basili] Alukos and [Adam] Fleck say, pointing out that American’s labor rate is the industry’s highest on an equivalent basis.”
Given that it lags behind United-Continental and Delta, Morningstar figures American is ripe for consolidation and would make a solid fit for partner JetBlue. The two cooperate on domestic and international flights at JFK and Boston’s Logan Airport, and JetBlue’s lighter cost structure would help American be more competitive while beefing up the combined company’s international business.
Late last month JetBlue CEO Dave Barger said his airline does not need to find a merger partner to remain competitive with rival Southwest. Time will ultimately tell as Southwest’s pending merger with AirTran will certainly enable them to apply some competitive pressure in JetBlue’s key expansion markets like Boston and the Caribbean.
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