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March 23, 2008


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Victor Cook


I've discovered that a lot of people involved in the airline industry -- especially investors -- are not pleased that I favor more engaging solutions to the airlines' problems than mergers and acquisitions. Their response is to find whatever fault they can in my posts and ignore the opportunities presented by the solutions I propose.

Thank you for your kind remarks.



It is rare (and refreshing) to find a financial person who is not in favor of airline mergers. As an airline employee who is equally unconvinced by all the merger hoopla spouted by investors who seem only interested in a quick return on share price, thanks for publishing your essay.


Dr. Cook - I just posted an entry on my blog about Southwest and some additional reasons for its success. I think there is another reason for the difference in shareholder value created in different mergers. It seems as if many of the mergers pursued by mainline carriers have been driven by fear. They fear that they might be left out at the dance if everyone partners up. They also fear loss of market share. This fear seems to exceed all other fears and has driven airlines to fly routes at a loss and to acquire airlines they don't really want. I would imagine the focus is not on shareholder value gained but on shareholder value not lost. Its a battle of attrition that never ends.

Victor Cook


Your question about Alaska Airlines is a good one. I don’t know why I added Frontier to the eight airlines used in the March 2003 analysis published in my book and failed to include Alaska. This is not splitting hairs. Though adding Alaska’s $3.51 billion revenues to the $114.7 combined revenues of the nine others should not make a significant difference -- you never know for sure without doing it. I’ll rerun the analysis and post the results as soon as I get a chance.

Regarding your other question, the differences in market shares you report from the DOT and those in my post are not a reason to distrust my results. The reason is that the DOT shares are based on revenue passenger miles (in billions). This definition is found in the Glossary of the Bureau of Transportation Statistics:

“One revenue passenger transported one mile in revenue service. Revenue passenger miles are computed by summation of the products of the revenue aircraft miles on each interairport segment multiplied by the number of revenue passengers carried on that segment.”

The market shares in my post are based on net revenues (in billions of USD) reported in the company financial statements ending December 31, 2007.

Thanks for your comments,



Mr. Cook, how can I trust your numbers on airline revenue share when it fails to include Alaska Ailines which has higher revenue than Frontier? While the subject is interesting and you obviously spent a lot of time on it, this lack makes me question the validity of your research. According to the DOT, Bureau of Transportation Statistics, from Jan-Dec 2007, these are the market share numbers...quite different from those you quote.

American 14.8%
Southwest 12.2%
United 11.5%
Delta 10.8%
Continental 7.8%
Northwest 6.7%
US Airways 5.4%
JetBlue 4.2%
AirTran Corporation 2.9%
America West 2.8%
Other 20.9%

According to the BTS, Frontier had a 2007 market share of 1.5% while Alaska had 2.6%. Splitting hairs maybe, but your numbers don't add up.

"Table 1 sets the stage for this analysis with each carrier’s share of the combined $114.7 billion revenues in calendar 2007. American Airlines (AMR) captured 20.0% of total revenue. UAL Corp (UAUA) walked away with 17.6%; Delta and NWA got 16.7% and 10.9% respectively. Continental (CAL) generated 12.4%; US Airways (LCC) had 10.2%; followed by Southwest with 8.6%; Jet Blue (JBLU) at 2.5%; and Frontier (FRNT) with 1.2% of group revenues."

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