US airline merger – more efficiencies or less consumer choice?

The last big wave of airline consolidation in the USA was over a decade ago. Could another realignment be on the cards? The proposed $6.6 billion merger between Frontier Airlines and Spirit Airlines, announced earlier this week, will create a low-cost heavyweight second in size only to Southwest, which is itself the fourth biggest US carrier after American Airlines, Delta Air Lines and United Airlines.

Frontier – which is effectively taking over its rival – paints the move as one that will deliver scale and make the combined entity more efficient and able to offer cheaper fares. However, regulators still have to approve the deal. Although Alaska Airlines and Jet Blue will still provide strong domestic competition on trunk routes, there could be concern that consumers will have less choice when it comes to selecting a domestic airline.

When it comes to choosing aircraft, most airlines are keen on continued Airbus-Boeing rivalry. Boeing’s well-documented troubles – the 737 Max grounding, a halt to production of the 787, and delays to the 777X – have handed the initiative to its adversary. Some worry Airbus’s increasing edge in single-aisle distorts the market, something Bombardier’s failure to become a third player in the 100-seat-plus segment with the CSeries (now the Airbus A220) made worse.

At a conference this week, analysts debated Boeing’s next product move, a challenge complicated by uncertainty over how much business travel will recover. One, Kevin Michaels, believes a shift in corporate travel policies will lead Seattle to a smaller aircraft than originally intended. This could be a 737 replacement to take on the Airbus A321neo, or a modern version of the much-missed 757. Boeing’s plans for its 260-seat “New Mid-market Airplane”, or MMA, have been on hold since 2020.

Time could be running out. Boeing’s balance sheet – not to mention its image – has been damaged by its programme woes, as well as the pandemic-induced slowdown in deliveries. Another analyst, Richard Aboulafia, predicts Airbus could hold a 70% share of the single-aisle market within 12 years – until the start of the crisis both airframers split that segment fairly evenly. He thinks that, unless Boeing launches a new-generation product this year, its problems could get worse.

An example of how the A321 continues to change established mores about long-haul operations came this week with news that Scandinavian carrier SAS is to open transatlantic services to Toronto from Copenhagen and Stockholm in June. It plans to use A321LRs, fitted with 157 seats across a three-class layout of business, premium economy and economy. On routes that cannot sustain the capacity – and costs – of a widebody, long-range A321 variants provide capable alternatives.

Another reason the post-pandemic aviation market could be very different to what went before is the pace of new product development by non-traditional aircraft manufacturers. With dozens of innovative platforms at advanced stages of design and testing in areas such as supersonic air travel, urban air mobility, and electric propulsion – and the political imperative to devise lower-carbon forms of transport – there is anticipation that the industry is entering a golden age of invention.

One of the would-be disruptors is Eviation, a US-Israeli start-up which said this week that a first flight for its all-electric, nine-passenger Alice is “just days away”, and that it is targeting 2023 for certification. No one expects battery-charged aircraft to take over the world in the next decade, but if Eviation convinces regulators of the safety of its aircraft, it will give a huge boost to all the other cottage-industry developers looking to bring similarly environmentally-friendly transports to market.