This merger won't be the last one for U.S. airline industry

A combined Delta and Northwest would have the size and reach that almost guarantees some competitors will respond in kind.

United Airlines, Continental Airlines and American Airlines have already had preliminary discussions about possible combinations of their own, and some in the industry believe a United-Continental tie-up could come quickly, which would create another megacarrier like Delta-Northwest.

That could mean the current six major domestic airlines shrink to three within a year, if regulators consent. That domino effect ups the stakes considerably as the government reviews the Delta-Northwest proposal.

The airlines may have fortuitous timing in trying to sell giant combinations to regulators and passengers. Among the factors: the recent enactment of an "open skies" treaty, which significantly loosens U.S. access for foreign carriers. Many airline executives argue that mergers are needed to survive. Soaring fuel prices have sent smaller carriers to bankruptcy this year, and overseas markets are becoming more competitive and deregulated.

"The competitor now is [across] the globe and not the contiguous 48 states," said Bill Swelbar, an airline analyst at the Massachusetts Institute of Technology.

Establishing a pattern

The Delta-Northwest deal is expected to set a pattern for others in that it will call for few job cuts or route pairings -- the traditional objections such combinations face in getting approval -- and raise the promise of elevating service above its current, often dismal levels, which many passengers view as the equivalent of a bus ride at 35,000 feet.

The open skies pact has set the clock ticking on U.S. carriers to improve service.

While their foreign rivals, from Europe to the Middle East to Asia, are ordering fleets of newer, more efficient jets, U.S. carriers have bought a relative handful of the newer planes. Northwest, for example, will be the first U.S. carrier to get a new Boeing Dreamliner, but it is still in the process of phasing out its fleet of DC-9s, which are among the oldest domestic planes still in service.

Mergers could be a way for major U.S. carriers to have deeper pockets for global competition and, at the same time, pare less profitable domestic service.

Jon Ash, airline consultant at Global Aviation Associates in Washington, argues that bigger carriers might not necessarily pull back on domestic service, however.

A Northwest flight that picks up only 20 passengers a day in Minot, N.D., might pick up 40 to link to a larger network with far more East Coast destinations after a merger with Delta, Ash said.

The rise of low-cost airlines

Murphy counters that the large airlines have little choice but to deemphasize their domestic service.

"They cannot compete head to head on price with newer carriers, who have 40 percent lower costs," said Murphy, a partner in Gerchick-Murphy Associates, a consulting firm based in Washington.

The capacity of low-fare carriers has grown by 73 percent since 2000 because of their relative advantages over the network carriers.

From 2000 through late 2006, the domestic revenue of U.S. network carriers, such as Northwest, declined by 15 percent.

That's why the size of the largest U.S. airlines may have less effect on the domestic market than it would have only a few years ago, in the view of analysts.

Will Delta-Northwest or other large mergers create airlines that provide consistently good service and consistent profits?

Few observers are willing to bet on it, given the industry's track record of unfulfilled promises.

"If you can't solve your own problems, it doesn't help you to get another party's problems," said Adam Pilarski, an airline analyst at Avitas Inc. in Chantilly, Va.

"It's the idea of two drunks holding each other up and that's the only way they can remain standing," he said. "Airlines that are smaller are more consistently profitable. Why do you think getting larger will increase your efficiency?"

"Does it solve their fundamental problems? No. Does it buy them some time? Yes," Arvai said.

"Scale is not going to solve the problem of low-price competition and rising fuel prices. They gain some market power," Arvai said. "But, as we look at the history of this industry, no one is able to sustain market power."

If this is the dawn of the age of megacarriers, the chief beneficiaries may be the executives, lawyers and investment bankers who engineer the combinations, said Kevin Mitchell, chairman of the Business Travel Coalition.

"They'll leave three huge dysfunctional families out there for someone else to fix," Mitchell said.