Threat of recession drives US airline consolidation

The growing threat of recession in the US is driving the country’s major carriers towards consolidation.

The latest surge in the oil price, which hit $100 a barrel for the first time this week, saw United Airlines, Delta and American Airlines raise domestic fares.

Carriers are expected to cut back on expansion plans and some are already cutting schedules. Analysts predict capacity in the US will reduce this year and the International Air Transport Association has predicted a worldwide slump in airline profits.

Mergers would help carriers make cuts and reshape the existing airline alliances, although consolidation will be opposed by unions and some politicians.

Delta appears likely to link with United Airlines after hedge fund Pardus Capital Management, a shareholder in both, called for their merger. However, Delta turned down a takeover bid by United partner US Airways last year.

United and US Airways are part of the Star Alliance group which includes Lufthansa and BMI, while Delta is a partner of Air France-KLM in Skyteam. However, Delta has been linked with Skyteam member Northwest Airlines.

Continental Airlines, a Skyteam member, has indicated it would not stand on the sidelines of consolidation. However, a spokesman said the carrier was not in merger talks and any deal involving Continental could be blocked by Northwest, which owns a golden share in the airline.

The US’s biggest carrier American Airlines has long sought a closer link with British Airways, but has been thwarted by regulators.

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