First time here? Check out the site's "greatest hits" or read a random post from the archives. Feel free to ask a question, and consider subscribing to the latest posts via RSS or e-mail. Thanks for visiting!

It’s o-vah.

US Airways is giving up in its efforts to merge with Delta. Delta’s creditors are backing management’s efforts to emerge as a standalone company, and the airline has lined up exit financing.

Will US Airways go after someone else? Maybe. Northwest, the obvious next choice, says it doesn’t want a merger partner. There are other combinations to watch, too. Midwest rejected AirTran’s bid. United and Continental keep coming up as possible suitors, and United’s CEO mentions his desire for consolidation anytime he sees an open mike.

The failure of US-DL may mean that the immediate rush to mergers is over, but I’m sure we’ll see a merger of some kind announced before the year is out.

For now, though, nothing has changed.

Related:
- Reader mail: What will airline mergers mean to consumers?
- Here we go again: Airline merger madness, back in the news
- US Airways bids for Delta

The good folks over at FareCompare want to know what you think will happen to Delta in the great merger game, so they’ve set up a poll. It’s not quite making book on the outcome, but they’re trying to see what the public thinks will happen.

(And no, the TradeSports/Intrade people haven’t set up a wager for airline mergers. Yet.)

Click here for the poll.

Reader Todd writes:

Not much word from you lately about all the airline mergers in the news. What do you think will happen? Is this going to suck or rock?

Ha! Well, Todd, as I’ve said before, on the “suck - rock continuum,” I think mergers are closer to “suck” for consumers. (See here and here.) Sure you might get a few more potential destinations or routings for your flights, but the total number of flights is bound to be cut, and prices in turn are bound to rise. Prices are already rising, despite oil prices dropping significantly in recent weeks. (Neil Bainton has the fare hike play-by-play.) With less competition, it’ll be easier than ever to raise fares and make them stick.

I expect some sort of deal is coming. Last week saw quite a bit of airline merger news. AirTran raised its offer for Midwest by 18%. One day earlier, US Airways increased its offer for Delta by 20% — an offer which Delta continues to reject. But with Delta in bankruptcy, will the creditors say no to the sweetened deal?…

Adding more intrigue, it turns out that Delta has been playing the field, doing everything it can to avoid merging with US Airways. Delta has been discussing merger possibilities with Northwest and United. We knew United was fishing for a partner, and has confirmed discussions with Continental. Now we know Northwest is up on the block, too. Add another name to the mix.

For some arcana: If Northwest merges with anyone, then that makes it easier for Continental to make a deal. Northwest holds a “golden stake” in Continental, and those super-deluxe shares have a veto power clause attached to them. Continental can’t merge with anyone unless Northwest agrees. That is, unless Northwest merges first. Oh, the humanity! So right now, I’m guessing that United and Continental are rooting for a Northwest-Delta merger, so everyone can merge and all the CEOs can have their huge payday.

Now Congress is getting in on the game, too, with both houses planning to hold hearings on the effect of mergers on airfares, and on the economy.

The hearings will likely be a lot of grandstanding. But make no mistake: Industry consolidation will mean higher fares. And it’s not just me saying that, or a media-hungry congressman. It’s the airline chiefs themselves. Delta is talking about decreasing service and raising revenue. That’s not even a particularly veiled threat of raising fares.

I’m not about to predict which specific deals will close, but I am sure one or more will happen. But I’ll continue to root against them.

Related:
- Here we go again: Airline merger madness, back in the news
- Reader mail: What’s in the cards for a United merger?

Reader Dave C. writes:

Rumors about United merging with Continental are in the news lately. What’s your take? Will it happen? What can passengers expect?

For a while now, these rumors have been floating around. Months ago, Continental’s CFO said he would be happy to see United offer a merger, as long as it came with a “bucket of dough.” (They’ve backed off that rhetoric, and now say publicly that they’d prefer to go it alone.)

It sure looks like United really is shopping itself. They just hired Goldman Sachs to “explore a range of strategic options, including possible mergers with other carriers.”

I’m no financial analyst, but when is the last time an investment bank DIDN’T recommend a merger or acquisition to a company that hired it? Call me a cynic, but the money is in making the deal, not in giving long-term advice.

The executives at United would stand to make a pretty penny on a merger, too. (United’s CEO just re-upped through 2011.)

So I think that SOME sort of deal is inevitable. Will it be with Continental? I have no idea. Route networks between the two airlines are complementary, but there are equipment differences and probable conflicts in determining seniority among employees. Plus, Northwest owns a stake in Continental and can play spoiler to any merger, unless it’s bought off. And the federal government can block any merger if it deems it uncompetitive.

You might also see some more complex deals. Hypothetical scenario: United buys Northwest but agrees to sell off the Pacific routes to avoid monopoly. Then United and Continental can merge. (Doubtful.) Alternatively, the companies merge but operate separately, like Air France-KLM in Europe. One company, two airlines. Who knows!

But the bottom line for travelers doesn’t look good. Planes are full, demand is there, and airlines are eking out a profit, even with high oil prices. When airlines say there’s too much capacity, it just means that they want to charge more. A merger would drive out competition and increase prices — at ALL airlines, not just United-Continental. Not to mention the mess that could arise from merging two frequent flyer programs.

I’m wary of a merger, and hoping it doesn’t happen.

(image: caribb)