Three-quarters of corporate travel managers said in a recent survey that they expect airline mergers to result in higher fares and more than half expect the quality of service to suffer.
Those were among the findings in a survey of 98 travel managers and other big buyers of airline tickets by the Business Travel Coalition, a group that seeks to represent the interest of business travelers.
“We’re going to pay higher fares,” said Cheryl Geib, national director of travel and meetings for the accounting firm Grant Thornton.
Pro-merger airline executives have said they hoped to sell big corporate customers on the notion that a merged airline’s expanded route network would make booking travel for a far-flung sales force, say, a lot easier and that redeeming frequent flier miles would also be more convenient.
Delta Air Lines is weighing a takeover of either Northwest Airlines or United Airlines, a unit of UAL. And, should one of those combinations be proposed, Continental Airlines is expected to also consider seeking a merger partner. That could reduce the current six big network airlines — AMR’s American Airlines and US Airways are the other two — to four. And further consolidation would be possible.
But the big customers are wary, knowing that higher fares are the aim, as airlines search for a way to remain profitable in an era when oil approaches $100 a barrel. Nearly every airline chief has said the industry needs to raise fares, and even without mergers they are trying.
In the survey of the travel managers — including a dozen whose departments purchase more than $75 million in airline tickets each year — 74 percent said they would expect higher fares and 53 percent said they would worry about a decline in service.
Many travel managers also noted in the survey that they were worried that mergers would reduce competition and make it more difficult to negotiate discounts.
Many business travelers already believe service is bad. “Customer service? What’s customer service?” one travel manager said in responding to the survey.
Another manager added: “Can it get any worse?”
Kevin Mitchell, who heads the Business Travel Coalition, said airline executives seem to think that full airplanes indicate that customers are happy. “There’s a bit of denial in the industry about customer service problems,” he said.
The airlines’ goals are to cut costs and raise revenue. A hedge fund that asked Delta in November to seek a merger with United estimated that such a combination could reduce costs by $585 million a year and that a merger of Delta and Northwest could reduce costs by $1.5 billion a year.
That would entail reducing the number of flights in some markets, shrinking or eliminating a smaller hub or two — Delta’s Cincinnati hub and Northwest’s Memphis hub have been mentioned as expendable — and using the resulting scarcity of seats to raise fares.
United’s proposed takeover of US Airways failed in 2001 in the face of questions from the Justice Department about its impact on competition.
“That is why they do these mergers — to reduce competition and raise air fares,” said Paul Hudson, executive director of the Aviation Consumer Action Project, a group affiliated with Ralph Nader.
However, the hedge fund proposing a merger of Delta and United, Pardus Capital Management, has argued that at current fuel prices the United States could be facing another round of airline bankruptcies unless there are mergers.
