Strategic Communications and Marketing News Bureau

Airfares could rise if Delta-Northwest deal spawns more mergers, expert says

CHAMPAIGN, Ill. – A proposed merger of Delta and Northwest airlines likely won’t drive up the cost of flying, but that could change if the deal sparks a flurry of consolidation among U.S. air carriers, a University of Illinois business professor says.

Finance professor Heitor Almeida says Delta and Northwest largely serve different regions, so a merger would not yield a dramatic reduction in routes that would increase demand for remaining seats and, in turn, ticket prices.

Fares could even dip if Delta and Northwest achieve efficiencies in booking and other operations that were touted by company officials Monday when the airlines struck a deal that would create the world’s biggest air carrier, he said.

But Almeida says it could be a different story if the proposed merger spawns more consolidations by airlines with overlapping territories, such as a rumored marriage of United Airlines and Continental Airlines.

“If more consolidation follows that brings less competition and fewer routes, then it’s possible that prices will go up beyond what is being driven by high oil prices,” said Almeida, who teaches classes on mergers.

He predicts federal regulators will approve the Delta-Northwest merger, but says a possible snowball effect will be debated as regulators mull the proposed deal.

“One concern will be that this might spur other mergers that could have worse impacts on the consumer,” Almeida said. “They may think if they let this one go through we might have problems saying ‘no’ to other mergers. It will set the bar.”

More mergers are possible in an industry beleaguered by high oil prices and stiff competition that have contributed to a recent spate of airline bankruptcies, Almeida said.

“Oil prices are one factor, but the industry hasn’t been doing great for a while,” he said. “Part of the problem is there is too much competition. It does make sense for this industry to consolidate a little bit.”

He also says the upcoming presidential election may have had a hand in the timing of the proposed Delta-Northwest merger, which would create an airline with more than $35 billion in annual revenues, topping current industry leader American Airlines.

“The simple point is that if Democrats get elected, then regulators are more likely to stop the merger,” he said. “It’s easier with a Republican administration, so that might be speeding up the timing.”

Editor’s note: To contact Heitor Almeida, call 217-333-2704; e-mail halmeida@illinois.edu.

Read Next

Life sciences Portrait of the research team posing together.

Minecraft players can now explore whole cells and their contents

CHAMPAIGN, Ill. — Scientists have translated nanoscale experimental and computational data into precise 3D representations of bacteria, yeast and human epithelial, breast and breast cancer cells in Minecraft, a video game that allows players to explore, build and manipulate structures in three dimensions. The innovation will allow researchers and students of all ages to navigate […]

Arts Photo of seven dancers onstage wearing blue tops and orange or yellow flowing skirts. The backdrop is a Persian design.

February Dance includes works experimenting with live music, technology and a ‘sneaker ballet’

CHAMPAIGN, Ill. — The dance department at the University of Illinois Urbana-Champaign will present February Dance 2025: Fast Forward this week at Krannert Center for the Performing Arts. February Dance will be one of the first performances in the newly renovated Colwell Playhouse Theatre since its reopening. The performances are Jan. 30-Feb. 1. Dance professor […]

Honors portraits of four Illinois researchers

Four Illinois researchers receive Presidential Early Career Award

CHAMPAIGN, Ill. — Four researchers at the University of Illinois Urbana-Champaign were named recipients of the Presidential Early Career Award for Scientists and Engineers, the highest honor bestowed by the U.S. government on young professionals at the outset of their independent research careers. The winners this year are health and kinesiology professor Marni Boppart, physics professor Barry Bradlyn, chemical and biomolecular engineering professor Ying […]

Strategic Communications and Marketing News Bureau

507 E. Green St
MC-426
Champaign, IL 61820

Email: stratcom@illinois.edu

Phone (217) 333-5010