Earlier this year, it was announced that US Airways and American Airlines were negotiating a merger. This announcement came on the heels of three other giant mergers in the airline industry, all of which have occurred within the past five years. In 2008, Delta merged with Northwest Airlines, becoming the world’s largest carrier by passenger traffic (although with the US Airways/American merger, they will now be the second largest). Additionally, in 2010 AirTran was bought by Southwest Airlines, and Continental was bought by United. What these four very significant mergers mean for the industry cannot be understated.
As Slate magazine’s Matthew Yglesias points out, the “four giant airlines will soon control 70 percent of the American market. That’s not exactly a monopoly situation, but it does mean that the 30-plus-year run of robust competition and ever-falling airfares is almost certainly over.”
Obviously, this will have a trickle-down effect for the travel industry in general, and incentive group travel specifically. The diminishing competition will inevitably drive ticket prices up rather than down, putting more of a financial strain on consumers. As a result, we can expect to see a bump in the cost of incentive trips across the board. In addition, the total number of flights to certain cities may be cut, forcing customers–and those who plan incentive travel programs–to book flights that may be less convenient. In some cases, certain flights may even become unavailable due to limited seating capacity, or the circumventing of smaller cities.
As Yglesias states, “when airlines merge, the smallest hubs in the new larger airline tend to lose out and shrink.” With that being said, however, the potential benefit of a merger is to hopefully put the airlines into a stronger financial position so that they can grow and improve their services. Whether or not this benefit will manifest in favor of incentive trips, however, has yet to be determined.
What these mergers mean is that incentive travel coordinators will need to be more proactive than ever in booking group space with the carrier offering the best routing, fares, and most favorable terms and conditions. With regard to the latest merger, challenges will need to be overcome as US Airways and American integrate their separate reservation systems. We experienced such challenges firsthand following the United–Continental merger. We had to navigate excessively long wait times to reach an agent, who many times were unfamiliar with the nuances and practices of the new company. Service levels will inevitably suffer for both the consumer and travel provider, which means companies like HMI will have to do more with less.
Luckily, HMI has been providing incentive group travel solutions for over 30 years, and we are fully prepared to handle the challenges that these new industry changes are sure to throw our way. We will continue to go above and beyond to provide the best, most cost-effective incentive solutions around.
Coordinate your incentive trip today with HMI’s team of travel professionals.