Why industry consolidation will impact Delta’s market share

Market Realist

Investing in Delta Airlines: A must-know company overview (Part 12 of 14)

(Continued from Part 11)

How a merger affects competition for international market capacity

According to CAPA (the Centre for Aviation), almost 50% of international capacity is provided by U.S. Airlines. Delta (DAL) currently stands at the third position in terms of international capacity (with 13.1%), after United Airlines (UAL) with 14.5% and American (AAL) with 14.2%, and it’s followed by U.S. Airways with 5.1% and Jet Blue (JBLU) with 3.9%. After the merger of American and U.S. Airways, the combined entity’s international capacity will increase to around 19%, making it the largest airline in the U.S. by international capacity. Competition should intensify between the three mainline carriers as they try to increase capacity and capture each other’s market share.

 

How the merger affects the three global airline alliances

Delta is part of the SkyTeam alliance, one of the three major global airline alliances. Members of the One World alliance should benefit from the merger of American Airlines and U.S. Airways, as its share increases to 34% from 26%. SkyTeam remains in the same position (30%) and Star Alliances’ share will decrease to 36% from 45% as U.S. Airways leaves Star Alliance to join One World. Delta’s third competitor, United Continental, is part of Star Alliance. Post-merger, Star Alliance’s advantage of higher market share will be diluted and the three global alliances will have almost equal shares, pushing each alliance to concentrate on providing wider coverage and improving routing and scheduling among its members.

Continue to Part 13

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