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Airlines Cope by Consolidating


British Airways and Iberia merger talks are just the latest.

The days of soaring stock prices and luxury flights have passed for airlines around the globe, but the new reality of cost-cutting and consolidation could keep the major legacy carriers from being permanently grounded.

The past few years have brought harsh times for the industry with more than a dozen small carriers filing for bankruptcy protection and many others, including Delta Air Lines (DAL) and Northwest Airlines, choosing to merge.

The latest merger could come as early as Friday, now that British Airways (BAY) has confirmed to Minyanville that its board, as well as the board of Spanish air carrier Iberia, are both holding separate meetings Thursday to discuss the possibility of a merger between the two airlines. BA already holds a 13.2% stake in Iberia and the Spanish airline has a 10% investment in the British company.

"It is increasingly apparent that the economic headwinds facing the airlines and their customers are anything but behind us," said James C. May, chief executive of the Air Transport Association, an air travel trade group. "The recent announcement that US unemployment surpassed 10% highlights one of the key factors impacting consumer buying decisions."

The overall industry has lost nearly $60 billion since 2001 and it's been plagued by a slew of unfortunate events since the September 11, 2001 terrorist attacks, including the skyrocketing price of fuel and the global economic downturn. These aren't the only concerns for the sector: A nagging need for modernization and an intrusive government have also kept airlines from returning to the days of luxury.

Yet, the sector hasn't been taking the blows lying down.
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