Mergers will not boost airline profits or lower costs for the long term, some observers say. Once several airlines combine, bigger route systems created by mergers are less likely to boost revenue for any individual carrier.
After several years of strong orders, Airbus and Boeing now have large backlogs. Airbus said it will boost production of its A320 to meet demand. Airbus executives say demand will remain strong in 2008, although it expects orders to fall below 2007 levels. Boeing also expects fewer orders in 2008.
The possible merger of Delta Air Lines and Northwest Airlines probably would receive approval from the Department of Justice, observers say. Some analysts say airlines might try to propose mergers before a new administration takes office. But House Transportation Committee Chairman James Oberstar, D-Minn., said he opposes a potential merger between Northwest and Delta because he believes any merger of major domestic carriers would result in rapid consolidation and hurt consumers.
American Airlines reported a fourth-quarter loss, noting it paid $367 million more for fuel than it would paid have at last year's fuel prices. The airline expects fuel costs to continue to climb and said bookings are slightly ahead of last year's levels. It is restraining capacity growth in case demand for travel drops off.