A Brief History of Airline Consolidation in the United States
Three acquisitions have shaped the aviation industry in the US. We examine which factors led to the most prominent American airline mergers.
Three acquisitions have shaped the aviation industry in the US. We examine which factors led to the most prominent American airline mergers.
DALLAS — While some think that the appeal from Spirit Airlines (NK) and JetBlue Airways (B6) against the blockage of their proposed merger is dead in the water, questions arise regarding the current state of airline consolidation in the United States.
Three acquisitions have shaped the aviation industry in the United States. Today, we examine which factors led to the most prominent American airline mergers.
Northwest Airlines was one of the major airlines in the United States, with a history dating back to the 1920s. Initially founded in 1926 as Northwest Airways, it primarily operated mail and passenger services in the Midwest. Over the years, Northwest expanded its routes and services, becoming a key player in the aviation industry.
Northwest Airlines operated various aircraft, including the Boeing 707 and the Boeing 747 jumbo jet. It was also one of the early operators of the Airbus A320. The airline played a crucial role in the development of air travel. It was known for its innovative approach, yet it faced financial challenges at various points in its history, including filing for bankruptcy in 2005.
Despite these challenges, Northwest managed to maintain its status as a significant player in the U.S. airline industry until 2008.
Just like Northwest, Delta Air Lines, founded in 1924 as Huff Daland Dusters and later renamed Delta Air Corporation in 1928, has a rich history in aviation. It began as a crop-dusting operation and became a major passenger airline.
Over the years, DL expanded its route network and services, becoming one of the largest and most influential airlines in the United States. With that, Delta played a vital role in developing the commercial aviation industry in the United States and internationally. It operated a diverse fleet of aircraft, and like many other legacy carriers, Delta faced financial challenges, including filing for bankruptcy on September 14, 2005.
With both airlines virtually making considerable losses in 2008, Delta Airlines completed a significant merger with Northwest Airlines. The combined entity retained the Delta name and became the world's largest airline. The merger enhanced Delta's route network, fleet, and operational capabilities, solidifying its position as a significant player in the global aviation industry.
Since the merger, Delta has continued to adapt to massive changes, implementing strategic initiatives to improve efficiency and customer experience. Today, Delta remains one of the major carriers in the United States and continues to strengthen its position in its alliance with SkyTeam.
United Airlines, founded in 1926 as Varney Air Lines, has played a big part in the development of commercial aviation. First starting as an airmail service connecting Pasco, Washington, and Elko, Nevada, it evolved over the years into one of the major airlines in the United States.
United significantly advanced air travel through mergers and expansions, introducing innovations such as the first flight kitchen and simulator. The airline grew its route network domestically and internationally, operating a diverse fleet of aircraft.
Like many legacy carriers and its counterparts Delta and Northwest, United faced financial challenges, including bankruptcy filings in the early 2000s.
Having its origins in Varney Air Lines (later known as Varney Speed Lines), Continental Airlines was founded in 1934. It underwent several name changes and expansions, ultimately becoming Continental Airlines in 1937.
The airline was the first to introduce innovations, such as the first airborne radar for commercial aircraft. Continental operated a diverse fleet, including the Boeing 707 and the Boeing 747.
In 2010, Continental Airlines merged with United Airlines to form a combined entity that retained the United name. The merger allowed the airlines to pool their resources, streamline operations, and create a more robust and competitive carrier in the global and U.S. aviation industry.
Since the merger, United Airlines has continued to adapt to changes in the airline industry, implementing strategic initiatives to improve efficiency, expand its network, and enhance customer services.
United remains one of the major players in the U.S. and global aviation markets while also being a major customer for Boeing since the majority of its fleet of 840 aircraft is made up of Boeing jets.
American Airlines, founded in 1930, has a long and influential history in the aviation industry. Initially formed by consolidating several small airlines, it became one of the major U.S. carriers.
American Airlines played a significant role in developing the commercial aviation sector, introducing innovations such as the first domestic jet service with the Boeing 707. Over the years, AA expanded its route network domestically and internationally, operating a diverse fleet of aircraft.
The airline faced various challenges, including financial difficulties and bankruptcy filings. However, it remained a crucial player in the industry, known for its commitment to safety, innovation, and customer service.
US Airways was founded in Pittsburgh as a mail delivery airline called All American Aviation in 1939. Over the years, it underwent several name changes and mergers, eventually becoming US Airways in 1997.
The airline focused on serving the East Coast and Midwest regions of the United States yet still faced financial challenges and ultimately filed for bankruptcy in 2002. Despite these difficulties, the airline continued to operate and sought mergers and partnerships to strengthen its position in the industry.
American Airlines and US Airways merged in a deal that created the largest airline in the world in 2013. The merger aimed to combine the strengths of both carriers, including their route networks, fleets, and operational capabilities, retaining the American Airlines name. It provided the merged airline with a more extensive network and improved connectivity.
Since the merger, American Airlines has continued to navigate the challenges of the airline industry, implementing strategic initiatives to enhance its services, expand its network, and adapt to evolving market conditions.
The impacts of airline consolidation in the United States have been a topic of mixed opinions and research. Some argue that consolidation has improved legacy carriers' performance and efficiencies, increased average airfares, and reduced competition in specific local markets.
On the other hand, research indicates that the average consumer has benefited from airline consolidation, with average airfares not spiking, the availability of seat miles increasing, and competition between large hubs served by several airlines enabling more nonstop options.
Additionally, a study on U.S. airline mergers' performance and productivity change showed that the overall efficiencies of merged airlines improved after the merger, with the improvement being more significant for network carriers than low-cost carriers.
However, it is also evident that consolidation has led to some adverse effects, such as the concentration of service in the most significant metropolitan areas and the potential for more connecting flights for customers not flying out of large hubs.
Looking to the present, the merger of JetBlue Airways and Spirit Airlines would have made it the 5th largest airline in the United States, practically eliminating Spirit Airlines as an ultra-low-cost carrier.
According to CNBC, JetBlue wanted to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares,” U.S. District Court Judge William Young wrote in his decision.
In the wake of this development, the fate of the proposed merger of Hawaiian Airlines (HA) and the Alaska Air Group (AS) is still yet to be decided.
Featured image: American and United aircraft. Photo: Brandon Farris/Airways
