America's airlines... The elephants learn to dance
Signs of recovery for an embattled industry
"IN THE clearest indication yet that things are improving in America's creaking airline industry, US Airways launched an $8.7 billion hostile takeover of Delta on November 15th. A friendly approach was rejected last summer, so US Airways' boss, Doug Parker, has decided to appeal to the bankrupt airline's creditors. The advantage of making a move now is that it is easier to cut jobs and slash costs while an airline is in Chapter 11 bankruptcy, as Delta has been since last year. Mr Parker says annual operating savings from the merger could amount to $1.65 billion, but would be only half that if he waited until Delta emerged from bankruptcy.
If the deal goes ahead, it would create America's largest airline. And even if it does not, there are other signs that life is returning to the sector. Two low-cost carriers, Frontier and AirTran, are pooling their marketing and mileage programmes to boost their prospects. This shows how budget airlines are coming under pressure as the network carriers recover their strength. Delta, which has just launched a big sale of discounted seats, feels it has cut costs enough to be able to offer low fares to win back business, taking the initiative in the price war that often happens in the run-up to Thanksgiving, the peak weekend for domestic air travel.
Having lost a staggering $35 billion in the past five years, America's airlines are now climbing out of the pit they fell into in 2001."
http://www.economist.com/daily/news/displaystory.cfm?story_id=8173567
Signs of recovery for an embattled industry
"IN THE clearest indication yet that things are improving in America's creaking airline industry, US Airways launched an $8.7 billion hostile takeover of Delta on November 15th. A friendly approach was rejected last summer, so US Airways' boss, Doug Parker, has decided to appeal to the bankrupt airline's creditors. The advantage of making a move now is that it is easier to cut jobs and slash costs while an airline is in Chapter 11 bankruptcy, as Delta has been since last year. Mr Parker says annual operating savings from the merger could amount to $1.65 billion, but would be only half that if he waited until Delta emerged from bankruptcy.
If the deal goes ahead, it would create America's largest airline. And even if it does not, there are other signs that life is returning to the sector. Two low-cost carriers, Frontier and AirTran, are pooling their marketing and mileage programmes to boost their prospects. This shows how budget airlines are coming under pressure as the network carriers recover their strength. Delta, which has just launched a big sale of discounted seats, feels it has cut costs enough to be able to offer low fares to win back business, taking the initiative in the price war that often happens in the run-up to Thanksgiving, the peak weekend for domestic air travel.
Having lost a staggering $35 billion in the past five years, America's airlines are now climbing out of the pit they fell into in 2001."
http://www.economist.com/daily/news/displaystory.cfm?story_id=8173567
