Buyers concerned about Delta-Northwest merger’s impact on service

Poll find few buyers say consolidation is a good thing for the airline industry

By Susan Avery -- Purchasing, 4/15/2008 8:36:00 AM

Delta Air Lines announced today it plans to spend $17.7 billion to acquire Northwest Airlines and create the world’s biggest airline. But business travelers and travel service buyers say the rash of airline industry consolidation may have a negative impact in the long run.

Delta and Northwest cited benefits to the merger such as expanded service reach and a “more resilient business model that is better able to withstand volatile fuel prices than either can on a standalone basis.” And while travel managers polled recently by the National Business Travel Association (NBTA) agree a merger of Delta Air Lines and Northwest Airlines will create an improved international route structure, they fear it also could negatively affect customer service in an industry already plagued with service issues.

“Travel buyers know that airline consolidation, such as the Delta-Northwest merger, can create more financially stable airlines with stronger networks, but they are concerned about the prospects of declining customer service and changes in their travel management relationships with new, merged airlines,” says Kevin Maguire, president and CEO of NBTA in Alexandria, Va.

While 80% of travel managers responding to the survey say further consolidation of the U.S. airline industry by 2009 is inevitable, just 22% say that consolidation is a positive development for the business travel community.

The survey queried travel managers on key aspects of airline service. A merger of Delta and Northwest would result in a more financially stable airline and a stronger, more convenient U.S. route structure say 46% and 35% of survey respondents, respectively.

At the same time, travel managers responding to the survey also say that the merger would negatively impact access to smaller U.S. markets (46%), flight schedules/frequencies (41%) and corporate account management (40%).

Looking ahead, 56% of respondents agree that there will consolidation between U.S. airlines and foreign carriers in the next five years. Forty-three percent foresee such international consolidation as a positive.

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