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January 20, 2008
Fleeting Benefits from a Delta Merger
. . . Any cost reductions, for example, could easily be eaten up by higher wages required to win labor’s support for a deal. And because one big merger could prompt a second — Continental Airlines is expected by many analysts to snap up United, Northwest or another carrier as a defensive gesture against Delta — any advantage provided by a bigger route system might be quickly neutralized.
They are unlikely to win over travelers, too. Big mergers could mean less service to some markets, as a newly combined airline might wipe out thousands of jobs by scaling back at smaller hubs. Fliers could expect a surge in delays as combining operations and computer systems would most likely create service meltdowns.
"A merger almost inevitably is going to cause some service problems,” said Philip A. Baggaley, an analyst at Standard & Poor’s who is dubious on the business benefits of combinations. . . .
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