WASHINGTON (Reuters) - Mergers between U.S. airlines are not add a "magic wand" and could add to problems at carriers in the short term rather than fix them, an industry executive said on Tuesday.
"Consolidation is not a magic wand," Henri Courpron of transport-focused investment bank and advisory firm Seabury Group said at the Reuters Aerospace and Defense Summit in Washington.
"It doesn't make problems disappear. It actually adds to the complexity," said Courpron, president of Seabury's aerospace division. "It's going to be a couple of years before you would see the real benefits of consolidation."
Mergers have become a hot topic for the U.S. airline industry which is struggling to maintain its fledgling recovery amid soaring fuel prices and a softening U.S. economy.
Jake Brace, chief financial officer of United Airlines parent UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz), said at the Reuters Summit on Monday that the U.S. airline industry should consolidate sooner rather than later, and preferably before the end of the Bush administration in early 2009.
In November, hedge fund Pardus Capital Management LP urged UAL and Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz) to merge. Delta, which has also been a vocal proponent of airline consolidation, has denied reports that it was in merger talks with UAL but said it hired advisors to help it review merger options.
Courpron said that any transaction needs a thorough plan to squeeze out costs and boost revenue as well as consensus among management, shareholders, and employees.
"It's not the days where you have two CEOs going out to dinner and making a deal on the back of a napkin," said Courpron. "Once you're out with your declaration of intent, then you're out of time, you need to start implementing the plan."
(For summit blog: summitnotebook.reuters.com/) Continued...
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