New York illustrates airline deal's allure

The combination of United and Continental Airlines would upend the balance of power at New York's airports. Continental was already the dominant player at one of the three, Newark Liberty International Airport. But in merging with United, it would gain a much bigger network of domestic routes in the United States and connections to the rest of the world that would leave its rivals in New York Delta Air Lines and American Airlines struggling to catch up.

While New York would be just one of the new airline's 10 hubs, the battle for market share there offers a window into why United and Continental found a merger so attractive. All the major U.S. airlines have been looking for ways to regain the upper hand as air travel has begun to rebound worldwide. And New York was already a major focus of their attention. Its airports Kennedy International, La Guardia and Newark play a critical role in both domestic and international travel. Combined, they account for four of the top five domestic routes and constitute the biggest hub in the United States for international flights. ``It's the most contested market there is,'' said Gail Grimmett, the senior vice president at Delta Air Lines in charge of New York. ``That's because it's the largest revenue pool.'' A big piece of the battle is for business travelers, who account for the bulk of the industry's profits.

To woo them, airlines are introducing sommelier-selected wines and lie-flat beds to their business cabins on international flights from New York. They are sprucing up shabby terminals and expanding their networks. If the United-Continental merger succeeds, the new airline will have a share of about 55 percent of domestic travelers in the United States and 65 percent of international travelers at Newark, where Continental has been building its lead for 10 years. Delta, which bought Northwest Airlines two years ago to become the biggest airline in the United States, has used its new muscle to expand its presence at both La Guardia and Kennedy. American, which was once the biggest airline in New York, has been losing ground. Until now, United has not been one of the big players in the area.

All this competition for the New York market has kept air fares relatively low so far. But analysts caution that if an airline becomes too dominant at any one airport, there would be less pressure to keep the lid on prices. Such concerns could raise antitrust issues for United and Continental's planned merger.

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The above article was extracted from Skyline updates of Skyline College. Skyline College is amongst the top MBA and BBA institutes in Delhi, Gurgaon (NCR).