Two regional airlines are considering a merger. How would you estimate the synergies?

One thing decides where the synergies are. Do the two airlines fly mostly the same routes, or do their networks sit side by side? And do they fly the same aircraft? I'd estimate the synergies in three parts, and keep them apart because I trust them to different degrees. The first is cost. That covers overlapping routes, the fleet, overhead and purchasing. For each one I'd ask what the two airlines pay for twice today. The second is revenue. A bigger network can sell more connections, and there's less price competition where both fly today. I'd count these at a discount, because they depend on how passengers and rivals react. The third is what it costs to get there. That's the one-time integration cost and the risk of disruption. Then I'd net the three and say how long the full amount takes. I'd start with cost, because it's in the airlines' own hands. Do we have a cost breakdown for both?

One thing decides where the synergies are. Do the two airlines fly mostly the same routes, or do their networks sit side by side? And do they fly the same aircraft? Do they sell their own tickets or fly for a bigger airline? I'll assume their own tickets, real overlap, similar planes and about $2 billion in combined costs. I'd estimate the synergies in three parts, and keep them apart because I trust them to different degrees. The first is cost. That covers overlapping routes, the fleet, overhead and purchasing. For each one I'd ask what the two airlines pay for twice today. Overhead is the easiest to size. If head office, IT and sales are about 10% of costs, that's $200 million, and merging two of everything might take out a quarter. That's $50 million a year, or 2.5% of combined costs. On overlapping routes they can fly fewer, fuller planes. One fleet type means one pool of spares and crews. Fuel won't move much, since two small buyers only make a mid-sized one. The second is revenue. A bigger network can sell more connections, and there's less price competition where both fly today. I'd count these at a discount, because they depend on how passengers and rivals react. A competition authority may also object on shared routes. The third is what it costs to get there. That's the one-time integration cost and the risk of disruption. I mean severance and one reservation system. Separately, I'd expect one pilot contract to settle at the higher pay scale, a lasting cost that comes off the yearly synergies. Then I'd net the three and say how long the full amount takes. I'd start with cost, because it's in the airlines' own hands. My hypothesis is that overhead and overlapping routes are most of what's dependable, less the pilot contract. Can I see both route maps and each airline's cost breakdown?