Flying Among the Merger Clouds

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As the majors expand their operations, the number of alternative carriers in many cities is shrinking. As a result of the Northwest-Republic merger, some 80% of all commercial passenger service in Minneapolis-St. Paul will now belong to a single carrier. In Detroit, that figure is 60%. After the Ozark- TWA deal, St. Louis will be dominated by a single carrier, while in Denver, United and Texas Air's subsidiary Continental will divide a market formerly shared with Frontier. In Pittsburgh, nearly 80% of flights are USAir's; in Charlotte, N.C., roughly the same proportion belong to Piedmont.

Where large airlines have not taken over regional carriers outright, they have often entered into more subtle arrangements aimed at funneling as much local traffic as possible into major hubs. United, for example, has an agreement with Air Wisconsin that incorporates the regional airline's passengers in United's more sophisticated, computerized booking system for travel agents. Delta has similar links with Atlantic Southeast Airlines, American with American Eagle. Says an airline lobbyist in Washington: "For the regionals, it's an advantage to be linked to the computer codes of the majors." As a result, large carriers have an increasing say in the pricing and marketing plans of regional carriers.

The big question, though, is how much airline consolidation will affect the cheap fares originally unleashed by People Express after the no-frills discounter's 1981 launch. Many of those bargains were still available last week. Budget passengers could fly from Los Angeles to San Francisco for as little as $39, or from New York to Los Angeles for $99. Boston to Houston could still be bought for $119, and Chicago to Miami for $89. Says Matthew Scocozza, Assistant Secretary of Transportation for Policy and International Affairs: "You can find flights for $39 to $169 in just about any market."

But there are already small traces of change in the jet stream. At last week's St. Regis press conference announcing the People Express buyout, Chairman Burr declared bravely that "we intend to continue to bring our form of headstrong, headlong competition to the fat cats, the big guys out there." Then Burr announced fare increases of up to 9.5% for his gasping airline. Texas Air's current flagship airline, Continental, recently shuffled its low- price fare structure for flights out of Denver, reducing more than 20 price options to a mere half a dozen. John Huggins, head of Boston-based Woodside Management, one of the country's largest corporate travel agencies, predicts that other major airlines will begin to hike their rates within the next four to six months, at least for business customers.