Phew! There's Something Fishy in the Air

American and Northwest are reported to be contemplating a merger of their own. But it's more likely bluff than the real deal.

By Frank Pellegrini Friday, June 02, 2000
    • I'll see your mega-merger, and raise you... Acquisitiveness in the airline industry was bound to take off in the jetwash of the proposed United-US Airways merger, but a report that honchos at No. 2 American Airlines and No. 4 Northwest have been in contact about a deal of their own — which would create a new top dog mega-carrier with nearly 30 percent market share — smells suspiciously like a bluff. "Obviously, there's a fever in the industry to consolidate for fear of getting left behind by United," says TIME business writer John Greenwald. "But it seems like the government would never allow this one. It doesn't make sense. It'd be like Time Warner buying Disney."

    An American and Northwest combo, says Greenwald, would have far greater route overlap (a red flag for competition-minded regulators) than the neatly complementary maps of United and US Airways. And United is divesting what little there is, at Washington's Reagan Airport, creating DC Air and handing it to BET mogul Robert Johnson in a little backyard lobbying of the Capitol crowd. But even that merger will get a very close look from the Justice Department, Congress, even the Europeans — not to mention the unions involved — and some analysts are giving it no better than a 50-50 shot at consummation. So American probably figures it can tip those odds in its favor by confronting regulators with the anticompetitive specter of the other big carriers lining up at the barn door to pair off and divide the skies amongst two or three behemoths. But a real merging of American and Northwest? It just isn't in the cards.