Once again, the media have demonstrated its disregard for the rationale behind business decisions.
Delta Air Lines (NYSE:DAL) and Northwest Airlines (NYSE:NWA) are in negotiations for a merger, which could be a win-win for both companies. However, a segment on NBC's February 15 "Today" portrayed it as the two airlines teaming up to take advantage of travelers and ignored the possibility that the survival of both airlines may hinge on this merger.
"But airline mergers have traditionally meant job losses, especially in the airlines' hub cities, as well as fewer flight options for passengers in smaller cities and higher ticket prices," NBC correspondent Tom Costello said. "In Atlanta, we found frequent travelers fearing that's exactly what could happen."
"Today" interviewed a traveler in Atlanta afraid they would see higher fares out of the Delta hub airport. But even in Atlanta, competition wouldn't be greatly affected by a merger. Currently, Northwest and Delta compete on only three routes from Atlanta - to Northwest's hub cities Memphis, Tenn., Minneapolis and Detroit.
Both Delta and Northwest filed for Chapter 11 bankruptcy in 2005. Delta emerged from bankruptcy in April 2007 and Northwest a month later. Higher jet fuel costs and excess capacity have plagued the airlines over the past decade. A merger could help offset some of these concerns.
The segment didn't include a spokesman from either airline, but instead interviewed a Democratic politician who is opposed to the merger.
"Competition is what is keeping prices reasonable today," Rep. Jerry Costello (D-Ill.) said. "If you eliminate competition, the fewer airlines you have the fewer choices people have."
Neither "Today" nor the congressman mentioned the impact of one of the airlines going completely out of business if a merger is blocked. Liquidation was narrowly avoided by Northwest after it filed for bankruptcy in 2005 according to USA Today's "Today in the Sky" airline blog.
"Today" only included one supporter of the proposed merger, airline travel consultant Terry Trippler, who said it would create a worldwide airline combining Delta's presence in Europe with Northwest's presence in Asia. But Trippler's support was undermined by the negativity in the rest of Costello's report.
A report broadcasted during CNBC's February 15 "Closing Bell" confirmed that Continental Airlines (NYSE:CAL) and United Airlines (NASDAQ:UAUA) are also negotiating a merger deal.
