MERGERMANIA

by George W Hamlin

A irline mergers are an old idea that, despite the recent rebuff of

US Airways by Delta Air Lines, may have found new life. While

the process occurs worldwide (for example, the formation of British

Airways from British European Airways and British Overseas Airways

Corporation; the more recent merger of KLM Royal Dutch Airlines

with Air France; and Air Canada’s amalgamation with Canadian, itself

formed from a number of carriers), this article is concerned with

the US experience, which has been particularly prolific. Similarly,

while there have been mergers throughout the history of the airline

industry, only the post-1960 period is discussed here.

GEO

RG

E W

HA

MLI

N

17A i r w a y s

Pre-deregulation mergers

In 1961, United Air Lines (UA) became the largest airline in the USA (and in the ‘free’ world, if you consider Aeroflot as a single entity) through the acquisition of Capital Airlines, eclipsing the previous ‘largest’ titleholder, American Airlines (AA). Capital was another domestic trunk airline—one of the air carriers ‘grandfathered’, albeit as Pennsylvania Central Airlines, in 1938 when US airlines came under economic regulation by the federal government.

Serving the area from the upper Midwest to the Northeast and south to New Orleans and Florida, Capital had overextended itself financially with a fleet of Vickers Viscount turboprops (Airways, June 2000). Had Capital not been in a regulated industry it likely would have been liquidated, with all assets sold. However, under the regulation of the Civil Aeronautics Board (CAB), the ‘failing business’ doctrine was invoked, so that Capital only disappeared into United.

Apart from simply making United larger, Capital also extended UA’s geographic reach, from almost purely east-west to a route system with significant north-south routes in the East and Midwest. Consequently, UA offered modest competition in the New York–Atlanta market. To borrow a term from the US railroad industry, this represents an ‘end-to-end’ merger; the other principal type is ‘parallel’. In the former, a carrier extends its routes to serve new points, and increases its average journey distance, or length of haul. In the latter, duplicative routes, infrastructure, etc, can be rationalized to achieve greater economic efficiency (at least in theory). Typically, an end-to-end merger increases revenue potential; a parallel merger offers the opportunity to reduce costs, and may enhance revenues if competitive services are rationalized, so that capacity is reduced.

During the Sixties, there were eight other mergers, four of which embraced Alaskan carriers and three involved what were classified by the CAB as local service carriers.

Early in 1967, Braniff International Airways (BN) acquired PANAGRA (Pan American-Grace Airways), thus consolidating US route authority to the west coast of South America in a parallel merger.

Western took over Pacific Northern Airlines (formed as Woodley Airways) in 1967. The next year Alaska Airlines consolidated its position in Southeast Alaska with the acquisition of Alaska Coastal Airlines and Cordova Airlines, and Wien Air Alaska merged with Northern Consolidated to form Wien Consolidated Airlines.

The local service combinations were Frontier Airlines’s acquisition of Central Airlines and Allegheny Airlines’s

absorption of Lake Central Airlines in 1967 and 1968, respectively, and the 1968 combination of Bonanza Air Lines, Pacific Air Lines, and West Coast Airlines to form Air West (later acquired by Hughes Tool Co and renamed Hughes Air West).

All of these were also about the addition of territory. When the ‘local’ air carrier category was created during World War II, it created essentially exclusive geographic franchises, with little overlap between them. Central and Lake Central were two of the smaller local service carriers, and Central was also confined to what was a sparsely populated region. For example, its Denver–Kansas City route had five intermediate points, all located in the state of Kansas. Thus, according to airline historian R E

G Davies, in his Airlines of the United States Since 1914: ‘The decision relieved the CAB of the difficult problem of trying to find a way of strengthening Central’s route network into a viable shape, an almost impossible task in a geographical area which allowed little room for competitive manoeuvre’.

Lake Central served a more populous region, but had little outlet to the large markets in the eastern USA for its route system that was centered on Indiana and Ohio. Allegheny, the local service carrier adjacent to Lake Central, could fulfill this need, and the acquisition of Lake Central put Allegheny into the important Chicago market.

United took over 41 Viscounts from Capital, increasing the size of its aircraft fleet to 264.

With the acquisition of Central, Frontier added Rolls-Royce Dart-powered Convair 600s (converted 240s) to its fleet of Convair 580s.

MEL

LA

WR

ENC

E/G

WH

CO

LLEC

TIO

NM

EL L

AW

REN

CE/

GW

H C

OLL

ECT

ION

M a y 2 0 0 718

Air West represented a relatively straightforward combination of all the local service authority west of Phoenix and Salt Lake City. One of the reasons for the locals seeking to combine and extend their service territories was the availability of short-haul pure-jets; it is unlikely that Lake Central on its own, for example, could have made effective use of this relatively expensive equipment within its original territory.

Merger activity in the Seventies began with American’s modest, albeit successful, acquisition of Trans Caribbean Airways (TCA). AA was a power in the New York market, where much of TCA’s traffic originated or terminated, and the smaller carrier’s winter-peak seasonality was welcome at American, which, like most of the trunks, had a strong summer peak. TCA’s fleet of Douglas DC-8s, which were incompatible with American’s Boeing 707s, was shed quickly. Shortly thereafter, the New York–San Juan route acquired in the process became home to some of American’s 16-strong fleet of Boeing 747-100s.

The next year, 1972, saw a pair of mergers. Allegheny, historically oriented toward Pennsylvania, looked north and east to add Mohawk Airlines (MO), headquartered in New York state. Among the local service carriers, MO had pioneered the use of short-haul pure-jets with the British BAC One-Eleven; it also had extensive service in southern New England. More significantly, Delta absorbed perennial problem child (at least in a financial sense) Northeast Airlines (NE), adding NE’s Northeast–Florida route system, as well as Fairchild Hiller FH-227 turboprops that were used on Northeast’s remaining local route network in New England. Because of NE’s presence, there was no local service carrier created for New England. When Air New England was formed in 1975—the first local service carrier certificated since 1950—several routes and the FH-227s were hived off to that entity.

Like Capital, Lake Central had acquired European aircraft, in this case the French Nord 262. This resulted in one of the more bizarre livery/marketing combinations in the US airline industry when Allegheny painted the aircraft in purple and gold, and had hostesses in ‘French’ attire serving ‘bistro’ snacks. Each Nord received a French female name, eg Claudette d’Allegheny (Airways, Jan/Feb 1995).

MEL

LA

WR

ENC

E/G

WH

CO

LLEC

TIO

N

At the time of the merger of Air West, Bonanza, and West Coast to form Air West, the combined fleet numbered 48, including eight 75-seat Douglas DC-9 Series 10s (pictured at San Francisco).

American purchased TCA for its Caribbean markets and the DC-8 fleet, including DC-8F-54 Jet Trader N8785R James Roy II, was sold.

The 21-strong fleet of Mohawk BAC One-Eleven Series 200s (as well as one more on lease from Aloha) was taken over by Allegheny, whose titles have been applied to N1123J Air Chief Rhode Island, seen here at Boston-Logan.

IRA

WA

RD

/GW

H C

OLL

ECT

ION

PHO

TOS:

GEO

RG

E W

HA

MLI

N

MEL

LA

WR

ENC

E/G

WH

CO

LLEC

TIO

N

19A i r w a y s

Northwest Airlines originally had planned to acquire Northeast but retreated when the CAB announced that it would remove NE’s relatively recent Los Angeles–Miami nonstop authority in the event of a merger. DL, while it undoubtedly would have liked the transcontinental route, saw enough value in the winter-peak nature of the north-south Florida routes—particularly in the important New York market—and consummated the deal.

In 1973, Eastern Air Lines absorbed Caribair (Caribbean-Atlantic Airlines), fleshing out its network in the Caribbean.

As for ‘non-skeds’, in 1971 American Flyers Airline was merged into Universal Airlines, which ceased operations the following year with some assets acquired by Saturn Airways. Saturn itself had been taken over by AAXICO in 1965 (which retained the Saturn name) and merged with Trans International Airlines (TIA) in 1976. This little-noted transaction closed out US airline merger activity before deregulation, which began for cargo carriers in 1977 and their passenger counterparts in 1978.

Deregulation

A reasonable question is why mergers were necessary, now that airlines could choose their own domestic route systems at will, albeit with a transition period to complete freedom of choice.

Former local service carriers North Central Airlines (NC) and Southern Airways (SO) came together in 1979 to form Republic Airlines (RC), and chose to establish a new hub at Memphis, which was a central point in the combined network. NC and SO concluded that neither would have the ‘critical mass’ to survive alone in a free-market airline environment, and thus would be better off together, in what was a classic end-to-end merger. Further geography and momentum was gained when Republic acquired Hughes Air West in 1980, giving RC a reasonably nationwide presence.

All of the transactions described thus far were either ‘friendly’ or born out of necessity. The next merger began differently, however, in 1978 when Texas International Airlines (TI) proposed to acquire National Airlines (NA), even though NA was considerably larger than TI. Pan Am (and even Eastern) joined the fray, and saved National from the unwanted clutches of the Texas carrier. TI lost the contest, but gained considerable money with the run-up in value of the NA stock that it had purchased.

Why would the ‘World’s Most Experienced Airline’ enter into a bidding war over National, a modestly sized trunk whose route system missed most of the interior states of the US? Pan Am had long desired domestic feed for its international network, but under regulation was systematically denied by the CAB, even though that agency had little problem adding competition to PA’s routes from carriers such as Northwest and TWA (on the Pacific and North Atlantic, respectively) which had significant domestic route systems to flow traffic from the interior.

Thus, although it could now create its own domestic network, PA wanted to move quickly. When National was put into play by TI, Pan Am succumbed to what amounted to auction frenzy, and merged the Florida-based airline into its system in 1980. So what did PA gain? National had one of the more curious domestic route structures, with an historic north-south spine along the Atlantic, and

GEO

RG

E W

HA

MLI

N

IRA

WA

RD

/GW

H C

OLL

ECT

ION

North Central’s well-known ‘Herman’ duck logo was retained after the amalgamation with Southern to form Republic. With the acquisition of Hughes Airwest, the ‘top banana in the West’, Republic became the 11th largest US airline as measured by revenue passenger miles.

IRA

WA

RD

/GW

H C

OLL

ECT

ION

A Delta Air Lines ‘widget’ adorns this Yellowbird Boeing 727-200, a type introduced into service by Northeast.

M a y 2 0 0 720

the later east-west projection along the southern edge of the ‘Sunbelt’ (which at least was in an area experiencing high growth rates).

National’s old advertising slogan, ‘Coast to Coast to Coast’, reflected this well. Unfortunately the unwary buyer failed to take into account the large hole in NA’s network, as well as the lack of secondary points in both the northern states and Southeast.

Frank Lorenzo’s Texas Air/TI, emboldened by its experience in chasing National (as well as the cash obtained in the process) subsequently went after Continental Airlines (which, like National, shared the hub at Houston Intercontinental with TI), and succeeded in acquiring the larger carrier and merging TI with CO (retaining the Continental name) late in 1982; more merger and acquisition activity was destined to be in the offing for this entity.

In 1985, a post-deregulation start-up, People Express Airlines (PE), acquired Frontier, a former local service

GEO

RG

E W

HA

MLI

N

GEO

RG

E W

HA

MLI

N

Following the acquisition of National, Pan Am had the dubious distinction of operating all three US wide-bodies (the Boeing 747, McDonnell Douglas DC-10, and Lockheed L-1011 TriStar) simultaneously. Once named Wisty, this DC-10-10 (N70NA) became Clipper Star King.

IRA

WA

RD

/GW

H C

OLL

ECT

ION

carrier. Initially, both airlines were maintained as separate entities, although PE began 747 service between Newark and Denver to feed its new acquisition. Another start-up, Muse Air, was bought by Southwest Airlines in 1985; renamed TranStar the following year, this separate operation lasted until 1987 when it disappeared into Southwest.

Piedmont Airlines acquired Empire Airlines, a New York state-based ‘large regional’ in 1986. That year also featured two parallel combinations of former local service carriers with former trunks, as TWA (Trans World Airlines) acquired Ozark Air Lines, and Northwest incorporated Republic, itself the product of two mergers within the previous seven years. In both cases, this involved the elimination of competing services at hubs: St Louis for TW/OZ and Minneapolis for NW/RC.

There was merger activity each year for the rest of the decade. Texas Air folded start-up New York Air into Continental in 1987, because there was no longer a

Despite pre-acquisition assurances that Texas International Airlines and Continental Airlines would operate separately, the two carriers were merged and the CO title survived.

GEO

RG

E W

HA

MLI

N C

OLL

ECT

ION

21A i r w a y s

People Express thwarted the first attempt by Texas Air to acquire Frontier Airlines. Eventually, after a purchase proposal from UAL Inc fell through, Frontier was taken over by Texas Air and absorbed into Continental. The same fate befell People Express itself.

The purchase of Western made Delta the fourth largest airline in the USA.

PHO

TOS:

GEO

RG

E W

HA

MLI

N

The large Ozark fleet of Douglas DC-9s was picked up by TWA, including this Series 31.

Northwest’s merger with Republic gave it two new hubs, Detroit and Memphis, and the combined entity was the fifth largest airline in the nation. The early days of the marriage were disastrous, however, with myriad operational problems resulting in a long-held reputation for poor customer service.

Jet America was saved from bankruptcy by Alaska Airlines.

M a y 2 0 0 722

California’s PSA and AirCal were gobbled up by USAir and American, respectively.

need for a low-cost subsidiary now that CO, recovering from a trip through bankruptcy, had lowered its own costs. Simultaneously, Texas Air also incorporated People Express and Frontier into Continental.

In a more conventional transaction, American added former intrastate AirCal to its empire in 1987. The same year, Long Beach-based start-up Jet America was folded into Alaska Airlines, with the bulk of its route system disappearing. Finally, Delta acquired Western Airlines, adding a significant piece of territory (and a Salt Lake City hub) in the process. AirCal’s rival, PSA (Pacific Southwest Airlines), became part of USAir in 1988. A struggling newcomer, Florida Express, became a part of Braniff

Airways (Mark II). USAir, hardly having digested PSA, added Piedmont in 1989.

By the mid-Nineties, even independent-minded Southwest Airlines again succumbed to merger mania, acquiring Morris Air in 1994, although—as with Alaska/Jet America—disposing of a good portion of the Morris route system.

Two years earlier, USAir became associated with The Trump Shuttle (born as a result of the demise of Eastern). At first, US simply managed the northeastern carrier; it was acquired as a wholly owned subsidiary in 1997, and completely merged into its parent in July 2000.

A pair of new entrants was involved in another 1997

Florida Express, a BAC One-Eleven operator, went to Braniff Airways.

PHO

TOS:

GEO

RG

E W

HA

MLI

N

23A i r w a y s

transaction: ValuJet Airlines, which almost failed after the disastrous crash of one of its DC-9s in the Florida Everglades, acquired AirTran Airways, taking the smaller airline’s name to escape a tarnished reputation.

American acquired two more airlines: Reno Air in 1999 and TWA in 2001. More recently, upon its emergence from bankruptcy in 2005, America West merged with US Airways, retaining the US brand.

In addition to mergers of passenger airlines, there

has been activity among the all-cargo air carriers. In 1980, Flying Tiger Line supplemented its extensive Pacific network with the Atlantic system of Seaboard World Airlines. Tigers itself was subsumed into express parcel carrier Federal Express (FedEx) in 1989, giving its acquirer both coveted Pacific routes and access to the ‘heavy’ cargo market. Two years earlier, Purolator Courier was merged into Emery (a marketing entity that purchased capacity from others).

PHO

TOS:

GEO

RG

E W

HA

MLI

N

USAir also absorbed former local service carrier Piedmont Airlines.

The Trump Shuttle was managed on behalf of its owners, a consortium of banks, by USAir.

Both start-up Reno Air and pioneer major carrier TWA were acquired by American Airlines.

M a y 2 0 0 724

Purolator Courier was acquired by Emery in 1987.

PHO

TOS:

GEO

RG

E W

HA

MLI

N

AirTran Airways, a Boeing 737 operator, was taken over by ValuJet, which then changed its name.

Flying Tigers: The Airfreight Airline was just shy of its 45th anniversary when purchased by Federal Express.

25A i r w a y s

Modern US Airline Merger Dates

Carrier Year Date Disposition Capital 1961 June1 mergedintoUnited AAXICO 1965 November1 mergedintoSaturn Mackey 1967 January8 mergedintoEastern PANAGRA 1967 February1 mergedintoBraniff PacificNorthern 1967 July1 mergedintoWestern Central 1967 October1 mergedintoFrontier CordovaAirlines 1968 February1 mergedintoAlaska NorthernConsolidated 1968 April1 mergedwithWienAirAlaska AlaskaCoastal 1968 April1 mergedintoAlaska AirWest 1968 April17 formedbymergerofBonanza,Pacific,&WestCoast LakeCentral 1968 July1 mergedintoAllegheny Trans-Caribbean 1971 March2 mergedintoAmerican AmericanFlyers 1971 June4 mergedintoUniversal Universal 1972 May4 someassetsacquiredbySaturn Mohawk 1972 April12 mergedintoAllegheny Northeast 1972 August1 mergedintoDelta Caribair 1973 June1 mergedintoEastern Saturn 1976 November30 mergedintoTIA Republic 1979 July1 formedbymergerofNorthCentral&Southern National 1980 January7 acquiredbyPanAm;fullymergedOctober26,1980 HughesAirWest 1980 October1 mergedintoRepublic Continental 1982 October31 acquiredbyTexasAir&mergedwithTexasInternational;CO nameretained Frontier 1985-87 various acquiredbyPeopleExpressNovember21,1985,andoperated assubsidiary;shutdownAugust24,1986.BoughtbyTexasAir October31,1986;mergedintoCOFebruary1,1987 KeyAir 1986 August acquiredbyPresidential(thenWorld) Empire 1986 May1 mergedintoPiedmont Republic 1986 October1 mergedintoNorthwest Ozark 1986 October26 mergedintoTWA NewYorkAir 1987 February1 mergedintoContinental PeopleExpress 1987 February1 mergedintoContinental Western 1987 April1 mergedintoDelta AirCal 1987 July1 mergedintoAmerican JetAmerica 1987 October1 mergedintoAlaska FloridaExpress 1988 March1 mergedintoBraniff(MkII) PSA 1988 April9 mergedintoUSAir Piedmont 1989 August5 mergedintoUSAir Aspen 1991 June1 mergedintoAirWisconsin TheTrumpShuttle 1992 April12 USAirassumedoperation;acquiredaswhollyowned subsidiaryDecember30,1997;mergedintoUSAirways mainlineJuly1,2000 MorrisAir 1994 October4 mergedintoSouthwest AirTran 1997 September24 acquiredbyValuJet;AirTrannameretained Carnival 1997 September26 acquiredbyPanAm(MkII) RenoAir 1999 August31 mergedintoAmerican BusinessExpress 2000 December2 mergedintoAmericanEagle TWA 2001 December2 mergedintoAmerican AmericaWest 2005 September27 mergedwithUSAirways;onecertificateoperationsscheduled May2007 All-cargocompanies SeaboardWorld 1980 October1 mergedintoFlyingTigerLine FlyingTigerLine 1989 August7 mergedintoFederalExpress PurolatorCourier* 1987 September mergedintoEmery EmeryWorldwide* 1989 April17 mergedintoCFAirFreight*

*all-cargoauthoritybutnoFAAlicense

M a y 2 0 0 726

Asset acquisitions

There have also been cases, especially involving international route authority, where portions of an air carrier’s assets have been acquired by other airlines. This has occurred both by outright sale and also redistribution of route authorities following a collapse.

With deregulation came the opportunity for an airline to actually fail, as opposed to being saved via the ‘failing business’ doctrine. In spring 1982, as Braniff International Airways neared the abyss, its Latin American route system (partly inherited from PANAGRA) was sold to Eastern (EA). With its Miami hub, this was a natural extension for EA, and put that carrier solidly into the international arena.

A more startling development occurred in 1985, when United, which historically (until the award of a Seattle–Tokyo route early in the Eighties) had not ventured further away from the USA on a scheduled basis than Toronto and Vancouver, bought Pan Am’s Pacific division. Pan Am, as always, was in financial difficulties, and the cash allowed it to remain on the field of airline combat to fight another day, albeit in truncated form.

In 1989, Eastern sold the famous Air-Shuttle to entrepreneur/future television star Donald Trump (Airways, March 2005), who promptly renamed it after himself. Trump lost his airline to a consortium of banks three years later, and the entity was subsequently picked up by USAir.

Asset acquisition activity increased considerably in the Nineties. Eastern failed early in 1991, after agreeing to sell the Latin route system that it had acquired from Braniff to American. By now, both Pan Am and TWA were seeking cash, with the result that the two historic trans-

Atlantic flag carriers sold their prized London-Heathrow (LHR) route authority and slots to United and American, respectively. After a brief dispute and negotiation with the British over the US-UK bilateral, AA and UA were ensconced at LHR in 1991.

At the end of that year, Pan Am, probably the greatest

Pan Am raised $750 million (equivalent to $1.3 billion today) in 1985 with the sale of its Pacific division to United, which included a fleet of Boeing 747SPs (pictured), Lockheed TriStars, and a McDonnell Douglas DC-10.

GW

H C

OLL

ECT

ION

As part of its acquisition of Pan Am, Delta picked up what was left of PA’s trans-Atlantic network, along with a fleet of Airbus A310s.

GEO

RG

E W

HA

MLI

N

27A i r w a y s

name in the airline industry, folded, but not before selling what remained of its trans-Atlantic route system to Delta, along with PA’s shuttle operation in the Northeast. United subsequently obtained PA’s Latin American route authority in a bankruptcy auction.

There was also a significant non-merger. In March 1986, Continental’s parent, Texas Air, bought Eastern. Although there were thoughts of merging CO and EA to potentially create the largest airline in the world by a considerable margin, this never occurred. Eastern entered bankruptcy in March 1989, and failed in January 1991, although not before some of its route authority was transferred to Continental.

In the all-cargo market, UPS (United Parcel Service) Airlines acquired the non-aircraft assets of Challenge Air Cargo in 1999, with Challenge’s Latin American route authorities transferred to ‘Big Brown’ in 2001.

The overall verdict?

As the 21st century progresses and the airline industry matures and consolidates, it is likely that there will be more consolidation, both in the USA and elsewhere. Let us hope that this activity will result in sensible combinations that are led by, and benefit, airlines with a sound economic base, rather than simply preserving the economically obsolete for a brief time before the inevitable occurs.

Based on the history of mergers, both investors and management should be wary of full-scale consolidations because they come with the headaches of merging

workforces and disparate fleets. While these issues can be overcome, considerable expense may be involved, and if not approached carefully, particularly from a personnel standpoint, operational performance and service can suffer.

Most major air carriers now possess considerable geographic breadth, particularly with respect to domestic route systems. As a result, any combination involving American, Continental, Delta, Northwest, and United will have to deal with the plethora of hubs (Chicago, Cincinnati, Cleveland, Detroit, St Louis) in a relatively small area in the Midwest, with others, including Minneapolis/St Paul and Memphis, located not far distant. All are attempting to capture many of the same traffic flows, particularly for long-haul east-west routes.

Acquisition of specific assets may be more attractive. This will avoid the need to shed redundant parts of a merged pair of airlines with the ‘whole enchilada’ approach. In fact the best economic result may be to parcel out the desirable portions of a carrier to those that can make best use of them, and therefore are willing to pay the highest price.

Although Braniff’s Latin American network did not ensure the survival of Eastern it appears to have been a positive addition—it certainly was for American, its new owner. United’s acquisition of PA’s Pacific market was clearly a winner. Both Northeast shuttles still exist, and several would line up to buy American and United’s Heathrow authorities. Delta is now the largest trans-Atlantic carrier (an impressive achievement for an airline that had no service in this market until 1978), although the value of the former PA ‘franchise’ in New York has

A Delta-Northwest combine would have competing hubs at Cincinnati and Detroit—at least initially.

GEO

RG

E W

HA

MLI

N

M a y 2 0 0 728

been eroded by Continental, across the river in Newark.

A final word about Pan Am: although its travails can be read in part as the long story of the terminal illness of the once mighty ‘chosen instrument’, through amputation, in the form of asset sales, PA managed to survive far longer. And in a further hint that assets, rather than complete airlines, are ‘where it’s at’, what Pan Am acquired in its 1980 merger wi th Nat iona l b rought essentially no value. ✈

Allegheny/USAir/US Airways: Solid positive results from Lake Central and Mohawk (both of which occurred under airline regulation). Piedmont, in a pared-down form (Charlotte, the only one of the four hubs extant at the time of the PI/US consolidation that continues as a full-scale hub), is still there, but PSA can be considered a ‘magic act’, as in ‘now you see it, now you don’t’. Two of the three PI hubs (Baltimore and Dayton) no longer exist. Too soon to tell about the merger with America West, although initial financial results are encouraging.

American: Acquisition of TCA was successful, albeit modest. Both AirCal and Reno Air can be considered magic/disappearing acts. AA also had problems with post-deregulation hubs, with Nashville, Raleigh/Durham, and San Jose missing in action, although Miami—largely on the strength of the former Eastern routes to Latin America—has turned out well. The timing of the TWA acquisition was unfortunate, but a reduced St Louis hub remains.

Continental (et al): Lots of turbulence and multiple bankruptcies but now on a solid footing. An airline that once did not operate east of Chicago is now the largest single carrier in metropolitan New York.

Through asset sales, Pan Am survived a lot longer than many believed possible. The National

merger brought routes and equipment, such as these Boeing

727-200s, but no long-term value. GEO

RG

E W

HA

MLI

N

Delta: Success with Northeast (pre-deregulation) and Western (post-deregulation); the addition of Pan Am’s trans-Atlantic system nearly ruined the company, but has since been stabilized.

Northwest: Hub consolidation in major markets has proven successful; Detroit is now a major international gateway.

Pan Am: Acquisition of National is a good candidate for the ‘ugly’ category.

Republic: Worked well enough to be acquired; all three of its hubs still exist.

Southwest: Morris Air merger essentially asset acquisition—aircraft and Salt Lake City hub.

TWA: Monopolizing St Louis did not guarantee survival; one hub is apparently not as good as three (see Northwest).

United: Capital merger provided a solid base; asset acquisitions have helped even more.

Mergers: the good, the bad, and the ugly

29A i r w a y s