- How Long Will This Health Care Firm's Rally Last?
- Dubai a 'Wake Up Call'—Expect Volatility Now: Market Pro
- Treasury Threatens Banks, Not Borrowers
- We're Approaching a Market Bubble: Portfolio Manager
- Hershey Shares: What Options Are Saying
- Nov. 30: Unusual Volume Leaders
- Why Careful Shoppers Are Great for the Box Office
- Blue Nile CEO: 'We're Having the Best Cyber Monday Ever'
- Best Online Retailers to Buy Now: Internet Analyst
- Trump: Time to Force Banks to Start Lending
- More Late on Auto Loan Payments in Third Quarter
- Treasury to Sell 12.7 Million Capital One Warrants
- Contagion Fears Calmed by Dubai World Plan
- AIG Cuts Debt to Government by $25 Billion; Shares Up
- GM Sees China Sales Soar 110% in November
- China Hires Foreigners to Manage Forex Reserves
- Bank of Japan Offers Liquidity at Emergency Meeting
- Somali Sea Gangs Create Pirate Stock Exchange
MOST SHARED
- Good Sign for the Economy: 'Greed' Makes a Comeback
- Dubai Stocks Could Fall a Further 30%: Charts
- Timeless and Time-Tested Warren Buffett Watch Predictions
- Bank of Japan Offers More Liquidity at Emergency Meeting
- Dubai Markets Close Sharply Lower for Second Day
- Manufacturing in Focus as Bulls Call for Turn in Dollar
- Treasury Threatens Banks, Not Borrowers
- What to Expect from Cyber Monday
- Dubai World Set to Restructure About $26 Billion of Total Debt
- Bove: 26 Banks May Need To Raise More Capital
Text Size 
Mergers aren’t a “magic elixir for fixing the U.S. airline industry, said Robert Crandall, former chairman and CEO of AMR Corp. [AMR
Loading...
()
] , the parent of American Airlines.
“The reality of airline consolidation is that it doesn’t generate any cost savings and in many respects it generates cost increases,” Crandall said Friday on CNBC's "Squawk Box." “It tends to create employee dissatisfaction and therefore further degrades service levels.”
Mergers are enticing because managers see the “power of the network” but often make a basic miscalculation, he said.
“Where you find two airlines whose networks link as oppose to compete, you would, in that circumstance, have some system synergies that could be translated into revenue increases,” Crandall said. “But I would caution everyone involved (that) there’s a lot of downside as well.”
He said the airline industry’s basic problem is that it can’t properly price its services because there’s so much competition between hubs.
“If you have a big consolidation, some of the hubs might get closed,” Crandall said. “Whether that would have any long-term positive effect I think is very much open to question because there’s a constant flow of new, aspiring airline moguls into the business.”
Congress needs to fund upgrades to the nation’s air traffic control system and then get out of the way.
“This is one of the things that only government can do and that government has done very badly,” Crandall said. “It has been under-funded, under-planned, under-managed. We have a serious air traffic control problem and we’re falling behind Europe and Asia. We need to get on with it. Congress needs to get out of the way – give them the necessary money and get it done.”
Labor, especially among legacy carriers, is a another problem, according to Crandall.
“There are very strong unions in the airline industry, and inability of labor and management to work with one another in any sort of a civil way has been a terrible curse for the business for years and years,” Crandall said. “It appears to be just as bad today as it ever was.”
Southwest Airlines [LUV
Loading...
()
] and JetBlue [JBLU
Loading...
()
] are good carriers and will continue to grow, but have lost some of the competitive edge they once enjoyed, Crandall added.
- Goldman Sachs has forbidden employees from gathering in private holiday parties of 12 or more.
- Since its launch in 1998, Google has become a primary force on the Internet. How much do you know about the company?
- What do the gifts from the 12 Days of Christmas cost this year, and how do they compare to 2008?
- Raising alligators is hard work, and the fickle taste of rich consumers has just made it much harder, says the NY Times.
- A recent issue of ESPN Magazine was one of its top sellers ever, and it only took scantily clad athletes to make it happen.
- The continued real estate boom in China is partially fueled by a generational flood of newlyweds.
Data is a real-time snapshot *Data is delayed at least 15 minutes