Do you think there are too many airlines to choose from? Well, that might not be the case for very long. Looking at the number of proposed mergers and consolidations taking place in the airlines industry, the choices could continue to dwindle, and perhaps sooner than expected.
Last week, US Airways
Possible, failed, and missed M&As
Possibilities of a merger do exist. And, according to Bloomberg, the candidates with which a marriage could take place are United Continental Holdings
On the other hand, smaller carriers such as JetBlue
This is not the first time that US Airways has been considering joining forces with a fellow airline. Back in 2006, its attempt to merge with Delta veered off course. Later in 2008 and 2010, talks of a deal with what was then United Airlines fell through. US Airways didn't taste success even as the industry witnessed a spree of consolidations. Last year, United Airways acquired Continental to become the largest carrier in the United States. In 2008, Delta acquired Northwest Airline.
What a consolidation would mean
Consolidation isn't an easy game though. It is a very calculated and considered affair. In the case of airlines, it could be even more intricate. While considering a takeover, a carrier must take into account the routes the other carrier operates because acquiring a company operating in different areas greatly enhances the market base.
Cost efficiency is another reason why airlines are so bullish on mergers. Aligning routes also helps get rid of crisscrossing flights leading to fewer flights.
In view of high oil prices arising out of tensions in the Middle East, and U.S. carriers being forced to implement capacity cuts following a difficult start to the year, consolidation is not the worst option.
The Foolish bottom line
A merger might benefit US Airways, as it may help it increase its revenues and profits by expanding its network of flights and enabling more efficient operations. The possibility of US Airways joining forces with another big player remains strong. While this might pinch consumers' pockets as a result of higher fares, it would also provide investors with higher returns as the company prospers. Whether a deal takes place remains to be seen.
Sarosh Nicholas doesn't any own shares of the companies listed above. Southwest Airlines is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.