Comparing Delta's Potential Partners

[Eagle757shark]

Comparing Delta's potential partners

The Atlanta Journal-Constitution
Published on: 01/16/08
Delta is reportedly exploring a possible merger with United or Northwest airlines.
Here's a look at each potential marriage, as well as some pros and cons if either United or Northwest combined with Delta:


COMBINED MARKET SHARE

• Delta and United: 29%

• Delta and Northwest: 23%


COMBINED FLEET

• Delta and United: 900 aircraft

• Delta and Northwest: 811 aircraft



COMBINED REVENUE

• Delta and United: $37.7 billion

• Delta and Northwest: $29.9 billion



TOTAL EMPLOYEES

• Delta and United: 98,600

• Delta and Northwest: 76,000


KEY MARKETS

• Delta and United: Combines two largest U.S. hubs (Atlanta and Chicago) and Delta's trans-Atlantic and East Coast networks with United's Asian, Midwest and West Coast markets.

• Delta and Northwest: Combines Northwest's Asian network and Midwest presence with Delta's trans-Atlantic, East Coast and Southeastern presence.


PROS

• Delta and United: On paper, many industry experts say there is no better match.
The carrier would have truly global reach, and both operate many of the same types of jets.

• Delta and Northwest: Global reach and more opportunities to cut costs.
CEOs Richard Anderson of Delta and Doug Steenland of Northwest know each other well, which could help smooth top-echelon integration issues.
A deal between No. 3 Delta and No. 5 Northwest could be more palatable to regulators.


POSSIBLE PITFALLS

• Delta and United: Regulators could block creation of such a massive airline.
United has several unions, while only pilots are unionized at Delta, so labor integration could be complicated.
Both airlines have Rocky Mountain region hubs — Delta in Salt Lake City and United in Denver — and one or the other could be closed.

• Delta and Northwest: Like United, Northwest is much more unionized than Delta, and its unions would presumably fight to keep certification or at least seniority protections.
The two airlines' fleets do not match up nearly as well as Delta's and United's, which could pose complications.
Delta's Cincinnati and Atlanta hubs overlap somewhat with Northwest's in Detroit and Memphis.


ATLANTA IMPACT

• Delta and United: United is a larger carrier and arguably the better-known brand.
That would give it leverage to try to keep the surviving name and possibly keep the headquarters in Chicago.
Even if that happened, the Atlanta flight hub would likely remain intact, so there would be little effect on air service to the city.

• Delta and Northwest: Northwest is smaller than Delta, so it's more likely that Delta would be the surviving brand and the headquarters would stay in Atlanta.
It's highly likely the Atlanta flight hub would remain intact either way.

 

[BID]

Interesting facts,

I think the fact that Richard Anderson and Doug Steenland know each other well is a big factor. Many believe this is one of the many reasons Anderson was picked as CEO of Delta Airlines.

On the other hand, I get the feeling the egos at United might be on the XL size. Tilton wants to run the whole show.

 

[Draginass]

Don't forget the massive payouts and bonuses to the execs. All the big shots will walk away with 10s of millions of dollars each from the deal, then leave it for someone else to clean up the wreckage in a year or two. And . . .a lot of people are going to lose their jobs, especially in Minneapolis and Memphis.

 

[Dizel8]

Tilton wants to run the whole show.

I diasgree, the people I know at UAL are always lamenting that Tilton doesn't actually want to run UAL, just merge it!

 

[Eagle757shark]

Jan. 22 (Bloomberg) -- UAL Corp.'s United Airlines posted a fourth-quarter loss today, and Delta Air Lines Inc. may do the same tomorrow, bolstering their arguments for industry consolidation.
Delta is being encouraged to combine with Northwest Airlines Corp. by Air France-KLM Group, a person familiar with the European carrier's plans said Jan. 17. A deal may come this week, the Atlanta Journal-Constitution reported Jan. 19, citing unnamed people. Delta, United and Northwest aren't commenting.
``Delta-Northwest is the deal that makes the most strategic sense,'' FTN Midwest Research Securities analyst Michael Derchin said in an interview last week. ``Delta's European and Latin routes and Northwest's Asia routes have hardly any overlap.''
U.S. airlines are betting that mergers would help cut capacity and boost fares to offset a 53 percent surge in jet fuel over the past 12 months. Those costs have eroded bankruptcy savings at United, Delta and Northwest, which all left court protection in the past two years.
Should Delta and Northwest get together, United may revive its 2006 talks with Continental Airlines Inc., the Financial Times reported on Jan. 19, citing people it didn't identify. A day earlier, Chief Executive Officer Glenn Tilton told employees that Chicago-based United had ``choices'' regarding mergers.
Earnings Reports
United parent UAL today said its fourth-quarter loss was $53 million, or 47 cents a share. That was less than the 97 cents-a-share loss estimated by 11 analysts in a Bloomberg survey, after United raised fares to offset fuel costs. It was the third loss in seven full quarters since the world's second- largest airline exited bankruptcy on Feb. 1, 2006.
Delta, No. 3 among U.S. airlines by traffic, may say tomorrow it had a loss of 18 cents a share, based on 11 estimates. Northwest's results, due Jan. 29, may show a loss of 8 cents a share, the average of nine estimates.
Collective losses at the eight biggest carriers may be $450 million, estimates Michael Linenberg, an analyst at Merrill Lynch & Co. in New York. U.S. airlines posted their first annual industrywide profit in 2006 after five years of losses.
While Atlanta-based Delta, United and Northwest refuse to discuss the status of any discussions, U.S. Representative James Oberstar said last week that Delta is in talks with United and Northwest. The Minnesota Democrat cited a meeting with executives from Northwest, based in the Minneapolis suburb of Eagan.
Regulatory Review
A Delta-Northwest combination would be more likely than Delta-United to get U.S. regulatory approval, said Ray Neidl, an analyst with Calyon Securities in New York.
Delta and Northwest, the fifth-largest U.S. airline, together would control about 25 percent of the U.S. market, Neidl said on Bloomberg Television on Jan. 16. United is the world's second-largest carrier, and AMR Corp.'s American is the biggest.
``I think both carriers are on board,'' Neidl said. ``The only thing that could stop it at this point is Washington and regulators.''
Should Northwest sign a definitive merger agreement, Continental also may win the freedom to join a consolidation push.
Northwest holds a so-called golden share in Continental, enabling it to block certain deals involving the Houston-based carrier. Northwest's signing of a merger accord would allow Continental to buy the golden share for $100.
Delta and Northwest probably feel a sense of urgency to consummate a deal within a month, lest investors think the carriers aren't serious or that the tie-up is flawed, said Stuart Klaskin of KKC Aviation Consulting Inc. in Miami.
`Lot of Pressure'
``If it takes longer than this 30-day horizon, it starts to look like they beat the drum but there was no follow-through,'' Klaskin said in an interview last week. ``There's a lot of pressure right now. It pushes the dynamic forward.''
Delta fell 54 cents, or 4.2 percent, to $14.51 at 9:43 a.m. in New York Stock Exchange composite trading, while Northwest dropped 56 cents to $16.44. UAL declined $1.48, or 4.5 percent, to $31.46 in Nasdaq Stock Market composite trading.
Delta has ratcheted up merger expectations since November, when it disclosed the creation of a board committee to study consolidation. On Jan. 16, CEO Richard Anderson told employees the carrier favors consolidation. Northwest CEO Doug Steenland said in a memo to workers the same day that the airline must ``consider the options available to us.''
Anderson, hired in August to replace the retiring Gerald Grinstein, gives Delta high-level insight into Northwest's operations because he was CEO at the smaller carrier from 2001 to 2004, FTN's Derchin said.
``To do the kind of due diligence you'd need on a deal this size, it takes months, not weeks,'' said Derchin, who is based in New York. ``I think they've already been working on this for quite some time. If you want walking due diligence on Northwest, it's Anderson.''
To contact the reporter on this story: Mary Jane Credeur in Atlanta at [email protected]
Last Updated: January 22, 2008 09:46 EST