Networks Ignore All Positives with Delta/Northwest Merger

Operating under the assumption that what's good for business is bad for consumers forces the media to give Americans a narrow view of the world.

All three network newscasts on April 14 reported the Delta Air Lines (NYSE:DAL) and Northwest Airlines (NYSE:NWA) as if it were a conspiracy to bilk air travelers out of more money.

"It's an unsettled time in the skies - planes grounded, flights cancelled, spiraling ticket prices," ABC correspondent Lisa Stark said on the April 14 "World News with Charles Gibson." "And now, things could get even more complicated. Delta operates 1,500 flights a day with hubs in Atlanta, Cincinnati, New York and Salt Lake City. Northwest - some 1,200 flights a day with hubs in Detroit, Minneapolis and Memphis. Put the two together, and passengers could take a hit."

The "hit" passengers are going to take is that there will be less capacity, which will decrease the supply of available seats and cause the price to increase.

But there are other factors involved with airfares beyond supply issues the report ignored. Consolidation won't necessarily decrease supply, just distribute it differently. According to "World News," two of the hub cities - Memphis and Cincinnati - could be de-hubbed after the merger.

However, that isn't necessarily a bad thing. When American Airlines (NYSE:AMR) and TWA merged in 2001, it opened up some of the St. Louis market to Southwest Airlines (NYSE:LUV) and that caused airfares to actually decrease. Currently, the Cincinnati market has the highest average airfare in the country because of Delta Air Lines' ability to control the airport's fare structure with little competition from other airlines.

The other two networks were also critical of the merger deal. "NBC Nightly News" assumed the merger would cause fares to increase because of supply. "CBS Evening News" trotted out a Democratic pro-airline union congressman that opposed the merger.

Even though the merger is official, all three networks warned of a potential merger between Continental Airlines (NYSE:CAL) and United Airlines (NASDAQ:UAUA).