Opinion > April 24, 2008

By Jeff Merski | Senior columnist

On April 14, Delta Air Lines and Northwest Airlines announced their intentions to merge their operations, thus creating the largest airline in the world.

Now, in the past, I have spoken out against airline mergers (“Airline merger hurts students, community,” Jan. 27, 2007) and indeed, I thought at the time that the proposed Delta-US Airways merger was a bad idea. However, this time, I’m in full support of the merger, and it’s not just because I think Northwest offers a much better product than US Airways.

Currently, oil is at a record high – well over $110 per barrel. This is a much higher cost than it was just a couple of years ago, when oil was around 50 percent less than what it costs today. With gas prices at a record high, the airline’s bottom lines are being blown up. So much so that on April 16, Delta’s Chief Executive Officer Richard Anderson stated that the airlines would need to raise fares by 15-20 percent to simply break even given the price of oil.

Thus, some level of consolidation makes sense. The airline industry has cut down on a lot of its costs that they can control – salaries have been slashed, airlines have reduced flights and the number of gates they control and employees have been laid off. There’s not a whole lot of fat that can be trimmed.

Thus, this merger can be beneficial in that it will take planes out of the air. Yes, there will be some harm – fares will most likely rise. But when oil is at the price that it is currently at, it makes some operational sense to raise fares. Yes, some cities will lose some service – out of Greensboro, I would not be surprised to see flights to Memphis, Tenn., and/or Cincinnati, Ohio reduced if not completely eliminated from this merger due to the proximity of much larger hubs nearby in Atlanta and Detroit.

Yes, this is a loss for the price-conscious consumer. However, all is not lost – there is still a good amount of competition available in the United States airline market, even if another two airlines were to merge. There will still be some degree of price elasticity that should allow for airfares to stay relatively low. Those $200 flights to Las Vegas might be gone, but so it goes.

Yet, with some economists saying that the United States is in a recession and the price of oil – a huge component of the airline industry – being at record levels, change needs to happen. Raising fares would help, but it isn’t enough, especially when some airlines might not agree to the fare increase and thus cause it to fail. Reducing capacity would increase demand, which would make a fare increase much more sustainable and would restore some balance to the turbulence that is currently being felt throughout the industry.

Jeff Merski is a senior political science major from North Andover, Mass.