Airline Mergers!

[On Your Six]

i think AMR is just trying to make DAL pay more for NWA than they would otherwise pay...

Credit Suisse upgrades Northwest on possible deal with Delta, AMR counter offer


NEW YORK, Jan 14, 2008
-- Analysts at Credit Suisse on Monday upgraded Northwest Airlines Corp. to outperform from neutral, seeing "a high probability" of a merger involving Delta Air Lines Inc.
The analysts also see a likely counter offer for Northwest from AMR Corp., operator of American Airlines, the largest U.S.-based carrier by traffic, and the possibility of a sale of Northwest to Continental Airlines Inc.

"The implication to our revised thesis is that while Delta is likely the first mover in industry M&A, it may not be the final mover and hence believe there is a material probability it may not participate in industry M&A, or, be forced to overpay," Credit Suisse said. If Continental preempts Delta to combine with UAL Corp., and AMR successfully outbids Delta for Northwest, "Delta is at risk of still being the odd carrier out (under which scenario, we would expect it to reconsider its stance on US Airways)."

The analysts said there is a 50% probability that a potential Delta announcement could pan out in the coming weeks given the high stakes and urgency.

Credit Suisse also said, in bidding for Northwest, AMR had nothing to lose "by making a deal [that could prove quite damaging to AMR's own interests over the long-term] more expensive for a potentially formidable competitor." Padraic Cassidy pc/vj

AA could not credibly bid for NWA. MSP, ORD and DTW hubs are too close together - no way the DOJ would agree to that. So, which of those three would they close? MSP? DTW? How many layoffs would that produce? How would those local politicians respond? Yeah, AA has zero credibility here and Delta should call their bluff.

AA is also afraid to be left out in the cold in a merger wave - but they have almost no financial flexibility. AA's stock is in the toilet and any competing bid would probably include stock and cash (AA can't afford more debt). AA, like UAL, is dead in the water with zero growth prospects...

 

[MINIME]

Not to mention, after what happened with TWA employees, most airlines' labor groups would fight an AA merger, acquisition or whatever. I'll venture to say that most pilot groups do not want to be in a position of defending their seniority or intergration against AA.

 

[Shrek]

It is definitely a Mexican standoff..........

My wild prediction - in the end..........nothin.

 

[Muddauber]

I think it is likely that Richard Anderson will merge Delta with Northwest.

Pros: Complimentary routes.

Cons:

1. Boeing carrier versus Airbus carrier

2. Different pilot cultures.

Muddy

 

[spinup]

General,

I have to say that your posts are among the most ego-centric I have read... You logic is flawed son. Your cited articles are theories only, not scientific fact. Do yourself a favor and take a look at all of the miss-diagnosed certainties of past surrounding this industry. The list is EXTREME to say the least. DAL is most definitely NOT in the driver seat at this time, and is by all accounts late with their merger rhetoric. All DAL has accomplished to this point is stating that they see a need for consolidation and have a Wish List. Thats it!

Talk of breaking up airlines is WILDLY SPECULATIVE. Especially when you forget that the UAL route structure is Globally superior to any existing carrier today, and to the very least certainly that of DAL. Speculatively, if a UAL/DAL thing had to happen, it would seem to me that the carrier with the better global structure would remain the most intact.

As an add-on, I have to laugh out loud every time you tout that the Delta name would prevail because "my CEO said so." We all know THEY would NEVER go back on their word. Take it for what it is, a rallying cry. An attempt to get the troops on board with managements direction. Your making more of it than is reasonable.

Believe me, UA, CA, NW and others have their own itinerary which may or may not be aligned with that of DAL. And Delta may find themselves in in dire straights as AA/NW and UA/CA merge. Only one thing is certain as far as I'm concerned, the Pacific heavy hitters will be involved one way or another if this is to happen. Where does that leave DAL?

 

[aircowboy]

What the general fails to mention is that Delta is desperate for access to Asia which is what NWA and UA enjoy, the majority of growth will be there. Without it Delta is screwed.

 

[johnsonrod]

What the general fails to mention is that Delta is desperate for access to Asia which is what NWA and UA enjoy, the majority of growth will be there. Without it Delta is screwed.

A little dramatic wouldn't you say? Neither NWA or UAL are doing that great right now despite their Asian access. If mergers are permitted by the DOJ (no certainty), I think you'll see Delta bagging either NWA or UAL's Asian routes (liquidation sale - CAL can take the domestic side and add West Coast hubs).

UAL's CEO seems determined to run the airline into the ground - he wants to cash out and golf more.

 

[FmrFreightDog]

Neither NWA or UAL are doing that great right now despite their Asian access.

Funny, I seem to recall NWA making more money than DAL last quarter. Not sure why you think NWA isn't doing that great right now.

 

[General Lee]

What the general fails to mention is that Delta is desperate for access to Asia which is what NWA and UA enjoy, the majority of growth will be there. Without it Delta is screwed.

I guess you missed the fact that we used to go all over Asia (Hong Kong, Fukuoka, Taipei, Bangkok, Nagoya) along with current flights to Tokyo and Seoul. We are starting Shanghai nonstop from ATL in March, and we still have rights to the other cities if we wish to return. We just need the planes (which we are getting--plenty of 777LRs) and we will return to some of those. We were also just awarded authority to Singapore and New Zealand, and we are watching the current open skies talks with Australia going on right now. But you knew all of that, right? Riiiiiiiight. Stick with things you know.


Bye Bye--General Lee

 

[jrcpilot]

Well Gen...It has already been said that if you merge with United, Delta goes away right along with SLC and CVG. Why....because NOBODY KNOWS who Delta is in the Orient. You say United, everyone knows! Northwest...same thing! You might lose YOUR name! Good Luck.

Nobody knew who Delta was in 1991 when Delta Acquired the Pan Am routes for a way bigger price tag than they were worth. Now Delta is a leader across the Atlantic and ALOT OF PEOPLE KNOW DELTA all over Europe. So the name thing could go either way but I would say the Delta brand may edge the NWA brand out. It could go the other way however just as people have stated that if it were United and Delta, Delta would lose the name. However I think the management at DL will negotiate to keep the DL name. Just my opinion