The past years have been unkind to the airline industry, with higher fuel prices and natural and political disasters that affected the performance of the industry as a whole. However, the airlines were not to be intimidated by those events and instead of folding up and closing shop, they took to using mergers in order to stay flying. Most mergers not only turned out to be life savers for these companies, they also turned out to be trinkets of gold as these companies performed better than expected last year.
In the last few years we saw the merger of United Airlines and Continental Airlines. The product, United-Continental Airlines, did exceedingly well last year posting a whole year net profit of $840 million. United is still recovering from losses it had incurred due to the merger with Continental.
One of the reasons why United was able to end the year on a positive note was due to its decision to cut the number of flights and increase their airfares. The strategy paid-off and the airline is well on its way to recovery. It is expecting to see a profitable 2012 and to continue being the top US airline company.
Ever since Delta Airlines bought Northwest Airlines, the company has been doing well despite the challenges of the past years. For the fourth quarter of last year, Delta Airlines posted a profit of $425 million. In order to combat increasing fuel prices and less demands, Delta had to cut down the number of flights and increase the amount of ticket prices as well. The strategy also paid-off for Delta and shares of the company rose after the announcement of their Q4 earnings.
One airline that did not do particularly good over the past years is American Airlines. The airline filed for bankruptcy protection last November and is currently undergoing restructuring and hopes that it will emerge as a more profitable airline. There are talks that American Airlines may undergo a merger with one of its competitors. US Airways has already confirmed that it is interested in exploring a deal with American Airlines.
A merger between US Airways and American Airlines will create an airline that is almost the size of its major competitors.
What the airlines have done in the past three years have made the industry seem to be a lot more stable than it has been in the past. “Airlines seem to much more stable than I can remember in decades,” said William S. Welbar, a research engineer with MIT’s International Center for Air Transportation. “Consolidation is having a significant impact on pricing, no doubt…”
With the continuing rise of aircraft fuel prices, there is still hope for the airlines to perform well in 2012. Some routes may have been unprofitable in the past and the airlines have learned to give out these routes and search for new routes that will give them profit. Mergers have enabled the airlines to become more flexible so that they can offer routes using aircrafts that are more efficient in terms of handling the demand.