ONLY full-scale mergers, and not mega alliances, will restore east-west trade to acceptable profitability, says Morgan Stanley analyst Doug Hayes.
"Alliances do not change anything as there are still the same number of price-setters," Mr Hayes told delegates to Newark's Journal of Commerce's recent TPM conference in Long Beach.
Mr Hayes said the US airline industry was only able to improve profitability when it consolidated and reduced the number of price setters, reported Lloyd's List.
"Without a profit sharing mechanism across the alliances, there will be temptation to fill your own ships over the ships of your alliance members," he said.
The industry could improve results if they managed supply and demand better as Maersk and CMA CGM have done, but the risk is that alliance members would resort to rate-cutting.
Today's four big global alliances stand to accelerate disruption of the industry as lines fight for market share in the east-west trades, thus prompting even more cascading into north-south trades.
But if lines can achieve true consolidation, then the upside potential is considerable, as the aviation industry has proved on transatlantic routes where there has been a huge concentration in the number of airlines, resulting in much better financial performance.
Source : HKSG.