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What’s Next for the Delta-Northwest Merger

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Plane at GateFrom Peter Greenberg Worldwide Radio

DELTA-NORTHWEST MERGER, WHAT WILL HAPPEN?

I’ve been talking about the impending merger between Delta and Northwest and it was finally announced last week.

However, the real thing that has to be discussed is not that mergers happen, but that we just went through two weeks with five successive bankruptcies in the airline business. Four out of the five stopped flying altogether—the fifth, Frontier, is still flying—but you know it’s a struggle out there.

Now, with the Delta-Northwest merger, you are dealing with a company that—if the merger actually goes through—will be the largest airline in the world. More than 1,000 planes, more than 75,000 employees and what is going to happen with route systems? What is going to happen with frequency and of course the big, bad daddy of them all … what is going to happen with fares?

I have not seen in my lifetime an airline merger that ever resulted in a benefit to consumers—I’ll just go on the record and say that. It’s great for the stockholders, it is great for the investment bankers, but just to say that we need to shave capacity to make it better, doesn’t necessarily mean it is going to be better for you.

Layoff NoticeHow many times have you heard major banks are merging and saying that no branches would be affected? And three months later you are on your hands and knees begging for a kiosk because there is nobody there anymore.

Now this is not going to happen overnight. There are a lot of regulatory hurdles that the airlines have to go through, not the least of which would be the U.S. Justice Department. However, under this administration I do not believe they would know an anti-trust case if it hit him.

So, that merger may go through, although you have some very angry congressmen and senators in the state of Minnesota who are desperately concerned about job losses for their constituents.

But let’s assume it goes through, my prediction is this: Both Northwest and Delta will continue to fly their schedules through the summer for obvious reasons. That is where they make their money and their planes are all full in the summer.

But what is going to happen after September 15 is it’s going to kick a lot of people in the you-know-whats for the simple reason that they are going to start reducing service, pulling out capacity and, in some cases, pulling out capacity altogether. If you are living in Fargo, North Dakota, or any one of those smaller markets, watch out.

Delta Air Lines has been waiting to dump their commuter airline ComAir (just as you may have read recently about American Airlines trying to dump Eagle). And you are going to see fares go through the roof regardless of the fact that oil hit $117 a barrel.

So, that’s just the icing on the cake. This merger may have happened before oil got out of control for the simple reason that airlines need to cut capacity on their domestic routes. There is no reason to believe whatsoever that the airlines are going to do anything the next three months in terms of their routes, their frequency, or their capacity other than what has been previously announced. However, when September 15 rolls around, watch out!

REDEEM YOUR FREQUENT-FLIER MILES

If you are a frequent flier on Northwest, if you are a frequent flier on Delta, run, do not walk, to redeem those miles. Redeem them anyway you can, and I’m not just talking about Delta or Northwest. Redeem them on their partner airlines. You can go up to 330 days out.

Downtown Des MoinesI’m not telling you to go to Des Moines if you don’t need to go to Des Moines, but figure out a way to go somewhere on those miles. Because otherwise, I suggest you go to an art supply store, buy a picture frame and hang them on the wall because they will be devalued almost exponentially.

It is happening across the board, but you have to understand from an airline point of view. No one ever wants at an airline level to redeem a seat if it is going to replace a revenue passenger.

It has gotten out of control, so when you now go from two airlines into one, why would they be anymore inclined to redeem those miles? The answer is they are not.

Even now, when you want to redeem airline miles they play a game of extortion with you, where they basically say, oh we don’t have the 25,000 miles, we have it at 50,000. Well, pretty soon they are going to say we don’t have them at 50,000 miles, we have them at 100,000 miles. That is assuming they want to give them to you.

So, you heard it here first— in fact, you heard it here often—run, do not walk! I do not trust the airlines as airlines, so why would I trust them as banks? Get rid of those miles!

HOLY FLIGHT!

I was watching on CNN the other day, and it was rather dramatic watching the Andrews Air Force Base as the Pope’s plane landed in Washington. And out of the sky comes this gleaming Alitalia 777, and I am going “Oh, is there irony here.” Here is an airline that is basically on life support that needs last rights, so who better to fly it than the Pope? I mean the airline deal fell apart with Air France trying to buy it. Nobody wants this airline. To me “Alitalia” stands for “all luggage in Tokyo all land in Athens.”

And you know what the good news was? They didn’t lose the Pope’s luggage! I would call it a miracle.

But here is the best part of the symbolism. They announced on this trip that the Vatican worked out this trip so the Pope wouldn’t have to pay for this flight—no, he did not redeem any God-like frequent-flier miles. No, they way he did it was, if you wanted to fly on the plane with the Pope, meaning the traveling media, they charge everybody in that plane $4,000 to get on that plane to fly in coach. Put the pope on the plane and charge everybody $3,000 or $4,000 to fly with the Pope.

It is a really simple solution. So the Pope flies for free, the Vatican will make money, Alitalia will still fly, but when it comes to your luggage … you’re on your own.

You’re going to have to get another priest in there for that one because I don’t think even the Pope can help him with that. Or maybe the Pope’s plane could stop at Heathrow Terminal 5 on the way home for a special mass for the 30,000 bags they could not find.

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