Dal/nwa/co

[SMMustang]

It definitely won't mean more pilot positions. Consolidation is the key word used.

 

[jetflier]

General Lee,

You're right that some companies have given cash to US Airways and also United. GE Finance is the main culprit. They were giving them finance deals with ridiculously high interest rates, but they really had no choice... Sign or liquidate. Looks like that's why this downturn hasn't seen any of the legacy carriers dissappear, yet.

It looks like that option is even drying up now though. The only way US Airways could get more financing was a merger deal. Viola: America US West Airways-Lines.

Totally agree with the "who knows" part. I sure don't.

TREF....

I think you hit the nail on the head, " the only way........to get more financing was a merger deal".......

This could be the entire plan, knowing that either NW or DAL will not be able to obtain financing at some point, merge.

Its interesting to note that the same hedge fund company has positions in DAL and NWA as of July.

 

[crashpad]

Did you hear about the Super LCC? By the time the legacys' finish their consolidation, it won't matter. Super LCC will be hiring though, so get those resumes dusted off cause the competition will be younger, better looking and work for half your salary and benefits.

 

[jetflier]

Airlines
Airline Mergers To Watch
Mark Tatge, 08.16.05, 1:45 PM ET

Get ready for a raft of mergers in the U.S. airline industry.

The proximate cause, of course, will be the bankruptcies. A filing by Delta Air Lines (nyse: DAL - news - people ) seems imminent, with Northwest Airlines (nasdaq: NWAC - news - people ) taxiing not far behind

Bankrupt airlines have become as familiar as long security lines at U.S. airports. US Airways Group (otc: UAIRQ - news - people ) has filed for bankruptcy protection twice. UAL (otc: UALAQ - news - people ), the parent of United Airlines, has been stuck in Chapter 11 for nearly three years. If US Air gets out, it will because of the generous agreement from America West Holdings (nyse: AWA - news - people ) to buy the carrier. (Analysts remain pessimistic about that marriage surviving.)

What's different this time? Economics in the airline industry have changed, and banks and the U.S. government are now more reticent to save flagging carriers. Together, these factors will produce a wave of consolidation. Forbes.com polled a host of experts, including money managers, analysts and former executives, asking them which combinations make sense.

The factors fueling the consolidation are well known. Passengers are filling more seats (83% load factor), but falling fares are killing the airlines. Yields, or passenger revenue divided by revenue passenger miles, are 28% below their levels in 2000, according to Airline Forecasts, an economic consulting firm. The airlines will have losses of $4.2 billion this year, bringing total losses to $38 billion since 2001.

Jet fuel bills are up $9 billion this year over 2003. And fuel, which once made up only 10% to 15% of total operating costs, now accounts for 27% to 30%, exceeding labor costs at some airlines, says Vaughn Cordle, who runs Airline Forecasts. Jet fuel has tripled in price since the 1990s and now runs $1.85 to $2 per gallon.

Here, then, are the combinations predicted by Cordle and our other experts:

UAL and Continental Airlines (nyse: CAL - news - people ): This would probably be the best match of all the major U.S. carriers. UAL, unable to get its bankruptcy reorganization plan approved so far, would make a natural fit with Continental. The latter would bring strong Latin American and U.S. East Coast routes to United's strong domestic U.S. and Asia Pacific route system.

With Continental, United would be more likely to secure the $1.5 billion to $2 billion in exit financing the airline has been so far unable to raise. Continental is arguably the best managed of the major carriers, with the possible exception of AMR (nyse: AMR - news - people ), the parent of American Airlines.

One caveat: Current UAL Chief Executive Glenn Tilton would be out of a job, since Continental management would most likely want to run the airline.

AMR and Northwest Airlines: Executives at American Airlines parent AMR have no desire to jump into the merger game, given the carrier's disastrous merger with TWA, which it purchased and liquidated. The experience was a major blow to the egos of American Airlines management and workers, many of whom lost their jobs.

But if Continental and United threaten to merge, the landscape could be so altered that American would have no choice but to rethink its position. Despite Northwest's thorny labor problems, the carrier brings a prize that American covets: routes to the Far East. So far, American has had to expend considerable effort to build those routes itself.

Other possible combinations with American that our experts mentioned include Alaska Air Group (nyse: ALK - news - people ). American could also be interested in select United assets, such as Asia-Pacific routes, should UAL have to raise cash.

Delta and Northwest: Both of these airlines have their challenges. Delta is getting clobbered in the southeastern U.S. from AirTran Holdings (nyse: AAI - news - people ) and other low-cost carriers. Pilots are retiring in record numbers, draining off badly needed cash, and CEO Gerald Grinstein is running out of options to keep the airline out of Chapter 11.

Northwest, meanwhile, under pressure to further cut labor costs, is facing the threat of a strike. Together, the airlines could leverage their partnerships with Air France-KLM (nyse: AKH - news - people ) and Sky Team Airline Alliance. The combined carrier would have a stronger regional, national and international platform. Northwest would bring U.S. upper-Midwest and Asian routes; Delta has its strong Atlanta hub and the lucrative shuttle between Boston, New York City and Washington, D.C.

Northwest may have a leg up on other carriers in completing this deal. It has a poison pill type of agreement with Continental that could prevent another airline from merging with the Houston-based carrier.