Airline Mergers--from our favorite paper

[General Lee]

USATODAY.com
Could airlines merge?
Friday September 16, 12:47 am ET

Delta Air Lines (DAL) and Northwest Airlines (NWAC) entered bankruptcy court together this week, and few will be surprised if they emerge together - as a single combined carrier.

The twin Chapter 11 bankruptcy filings Wednesday night, almost simultaneous and in the same New York courthouse, are leading many industry experts to believe the carriers may be exploring a merger within bankruptcy protection.

"I wouldn't be at all surprised," Benchmark analyst Helane Becker said Thursday. "In the past, these two airlines have talked and they have very little route overlap."

JPMorgan Chase analyst Jamie Baker said his firm "already has coined the term 'Delta Orient,' " a play on Northwest's former brand name, Northwest Orient.

Atlanta-based Delta is concentrated in the East and launches more daily flights across the Atlantic than any other carrier. Eagan, Minn.-based Northwest is concentrated in the Midwest and has a strong route structure in Asia.

The minimal route overlap is considered an advantage with federal regulators.

Airlines proposing a major merger would have to convince government regulators that the combination would not significantly reduce competition, or that one or both of the airlines would fail without the merger.

Northwest declined comment when asked about a merger with Delta.

In a conference call Wednesday, Northwest CEO Doug Steenland said the timing and location of the filings was coincidental. He added he has long believed consolidation among airlines is likely.

Delta spokeswoman Chris Kelly said Delta "expects there will be more consolidation in the industry. Right now, Delta is focused on its own restructuring efforts."

The twin filings, outrageously high fuel prices and declining hope for financial relief from the government could spark a round of merger talks as the remaining big troubled airlines scramble for partners.

A judge today is expected to approve a merger between US Airways and America West Airlines.

Five big potential partners remain: United Airlines, Delta and Northwest, all of which are now in bankruptcy protection, as well as American Airlines and Continental Airlines.

A merger of No. 3 Delta and No. 4 Northwest would propel the combined airline to the front of the industry pack.

It would pass American and United and become the biggest airline in terms of revenue passenger miles, according to an analysis by Back Aviation Solutions.

Bye Bye--General Lee

 

[Cyclone]

that would be one more brilliant move by their management teams long list of screw-ups

hey...our routes don't overlap so we can merge...don't think it is that simple...what about the lack of common equipment? seems like this would hurt efficiency/synergy of any merger

 

[Spooky 1]

No doubt about it the equipment disparity looks daunting unless of course you could return either the bulk of the Airbus stuff or the Boeing stuff to the lessors and start over.

 

[General Lee]

I think it looks like a good move. The key to approval from the government is lack of overlap. USAir and AWA had zero hubs overlapping(same city). Now, saying that, there would probably be some hub casualties, like CVG (close to DTW) and MEM (close to ATL) because it would be not economical to have them so close. NW already has some orders for the 787, and the combination would pit Boeing and Airbus against each other to get a better deal on future fleet types. DL does well with Europe and South America, and NW does well with Cargo and Asia. Throw in a bunch of E190s for mid size city pairs from the hubs, CR7s or Avros to smaller cities, Saabs or CRJs to even smaller cities with no LCC competition, and 738s/A320s to large cities. The Song 757s could blend in and do transcons from coast to coast to keep Jetblue honest. I like it. All of the widebodies then could do INTL flights, and cargo could stay up there in Alaska and bring home the bacon.


Bye Bye--General Lee

 

[TWA Dude]

I'm no legal expert but it seems to me unlikely to have two bankrupt companies merging. Don't forget that while merging is part of USAir's Plan of Reorganization the merger itself doesn't close until after emergence from Chap 11.

 

[General Lee]

I'm no legal expert but it seems to me unlikely to have two bankrupt companies merging. Don't forget that while merging is part of USAir's Plan of Reorganization the merger itself doesn't close until after emergence from Chap 11.

Why? It comes down to who may want to invest after the Chap 11 is over. If both companies go in and clean house, then come out better and stronger with less fat--more investors might want to invest. Look at United's response from investors---amazing. Put two airlines together with their own strengths and now a cleaner slate, it could easily pull in more money together than seperate. USAir wasn't going anywhere until a possible merger with a LCC with some stregths. NW and DL have more stregths, except they seem to be more INTL in nature--where the real revenue is these days with so many LCCs out there in the States.


Bye Bye--General Lee

 

[sandman2122]

The ink isn't even dry on the bankruptcy paperwork and the "general" is already predicting how to merge with NWA.......................incredible.

 

[mdf]

Nope,

I think it's going to be Southwest and Northwest. North South.

 

[79%N1]

The ink isn't even dry on the bankruptcy paperwork and the "general" is already predicting how to merge with NWA.......................incredible.

GENERAL KNOWS ALL......SEES ALL!!!!

 

[General Lee]

Finally 79%N1 sees the light! Finally.


Bye Bye--General Lee