Last week Delta and Northwest Airlines announced plans to merge and become the world’s largest airline. At first glance the merger seemed to be a wonderful idea: Northwest offers many routes from the United States to Asia, while Delta offered strong service to Europe. Their main hubs are in different parts of the country which would minimize the number of routes on which they directly compete. It seemed a great idea.

I had never considered using either airline because they did not offer as many options from Austin as American Airlines does, but the newly created Delta Airlines would be so large that I realized I had to give serious thought to changing my mileage runs to them.

And then the quarterly reports came out. Delta announced that it had lost $6.4 billion in the previous quarter. Northwest lost a more mundane $3.2 billion, giving them a combined total loss of more than $10.5 billion in one quarter. The numbers are staggering.

Let’s look at Delta. There were 91 days in the quarter: that means that during that period Delta lost $70,329,670 per day! How do you loose that kind of money? Yes, fuel costs have gone up, but not by $70 million per day! In fact, Delta announced that its fuel costs for the quarter were $1.4 billion, admittedly a huge number, but even if their fuel had been free they still would have lost $5 billion in 91 days!

Compare their loss to that at other airlines for the same period:

  • United Airlines — $537 million loss
  • American Airlines — $328 million loss
  • Continental Airlines — $80 million loss
  • Southwest Airlines — $34 million profit
  • Northwest Airlines — $3.2 billion loss
  • Delta Airlines — $6.4 billion loss

Can anyone look at those numbers and reasonably think that combining the last two airlines on that list is a good idea? One can look at the losses at United, American, and Continental, and say “If it wasn’t for the fuel hikes, they would have made a profit.” But there is no way to say that for the last two!

Is there a problem with Delta management? Are there problems with Delta’s union contracts? I don’t know, but the size of the loss is beyond comprehension. And here is one thing that makes it worse: the newly merged airline would have its headquarters in Atlanta at Delta’s current headquarters, and Delta’s current CEO Richard Anderson would be the CEO of the new airline.

Richard Anderson of Delta and Doug Steenland, CEO of Northwest, testified before Congress last week, saying that the merged airline would be stronger and better able to compete with foreign carriers that sometimes operate with generous government subsidies. They said no hubs would be closed, and only 1,000 people, mostly at headquarters, would lose their jobs. They predicted the combined airline could save $1 billion a year in operating costs. Congress loves to hear things like this and the committee seemed supportive of the plan.

However, a $1 billion annual savings does not sounds so grand when compared to a combined $10.5 billion loss in one quarter. In the week since the merger, Wall Street has expressed its displeasure of the plan, selling off the stock of both airlines, creating drop in value of the two of more than $1 billion.

If the Delta-Northwest merger goes through, experts expect a merger between Continental and United, and American and US Airways. When that happens, the majority of air travel in the United States will be controlled by four major airlines (the three merged lines, and Southwest).

Is that good for the consumer? No.

The best analysis I have seen of the proposed merger and other possible airline mergers was posted on Inside Flyer.

Given all of this, I’ll be staying with American Airlines.

In other airline news, another airline has announced it is filing for bankruptcy and will cease operations Monday. Eos Airlines, a business-class only airline that offered service between New York JFK and London Stanstead filed for Chapter 11 bankruptcy. It is the fourth American airline this month (following Aloha Air, ATA and Skybus) to file for bankruptcy and cease operations. Frontier also filed for bankruptcy but has continued to fly.

In the meantime, fuel costs continue to rise, putting additional pressures on all remaining airlines.