Dal/nwa/co

[Tref]

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.

 

[General Lee]

COpilot,

Re-read my post. And read this from the Dept of Justice:
http://www.usdoj.gov/atr/public/press_releases/2000/6905.htm

Northwest no longer owns a controlling interest of CO, but part of the agreement is that no other airline can merge with or aquire CO without NWA's consent. I believe that is still the case today. The only loophole seems to be that CO could aquire another carrier, but it would have to be an aquisition, not a merger.

Sorry if this is bad news.

That is the way I heard it too. So, a CAL/DL merger would have to have consent of NW, and I don't think they want to help create a larger competitor. DL has a lot of plusses---like a great hub at ATL, a well defined European presence, only one union, and a great LCC in Song. The negatives would be the debt and pension problems. Both of those could be cleared up in bankruptcy or through help from Congress.(pension extension) We also have trimmed down the size of our airline (pilot numbers have shrunk by 3000 numbers since 9-11). Who knows? (Again)


Bye Bye--General Lee

 

[NuGuy]

COpilot,

Re-read my post. And read this from the Dept of Justice:
http://www.usdoj.gov/atr/public/press_releases/2000/6905.htm

Northwest no longer owns a controlling interest of CO, but part of the agreement is that no other airline can merge with or aquire CO without NWA's consent. I believe that is still the case today. The only loophole seems to be that CO could aquire another carrier, but it would have to be an aquisition, not a merger.

Sorry if this is bad news.

COPilot,

Tref is right on the mark. Under the terms of the agreement with the DOJ, NWA traded in their common stock for preferred stock, while maintaining voting control in some instances, through the use of a "golden share". It allows NW to basically veto any capital project or corporate transaction, which obviously includes mergers.

General,

A merger with NW is very unlikely, because in the event of any merger, that would mean that NW pilots might have the opporunity to bid a crew base that is in or near a desirable place live, instead of a run-down rustbelt town, a god forsaken, frozen, windswept prairie or, well, MEM.

Nu

 

[General Lee]

COPilot,

Tref is right on the mark. Under the terms of the agreement with the DOJ, NWA traded in their common stock for preferred stock, while maintaining voting control in some instances, through the use of a "golden share". It allows NW to basically veto any capital project or corporate transaction, which obviously includes mergers.

General,

A merger with NW is very unlikely, because in the event of any merger, that would mean that NW pilots might have the opporunity to bid a crew base that is in or near a desirable place live, instead of a run-down rustbelt town, a god forsaken, frozen, windswept prairie or, well, MEM.

Nu

Nu,

I have a feeling MEM would be gone in a DL/NW merger. MEM and CVG are too close to the other major hubs, and I would think that they would be chopped. CVG is mainly a Comair base anyway, so they would have to put them all in JFK or GSO. MEM is too close to ATL. Both of those bases are mainly RJ bases anyway, so no major mainline displacements. I am sure there would be fences around aircraft and bases for a few years anyway. I would think you NW guys would like this merger, we don't have more than 500 pilots over 50 years old now. I would hope it would be a percentage merger versus a DOH merger, or we would all be $crewed.......Just a guess, though....maybe....maybe not....


Bye Bye--General Lee

 

[Tref]

General Lee,

I'd agree with you about Memphis shutting down with a DL/NW deal, but MEM does have some advantages: It has huge room to grow and 36C/18C "The World Runway" is about a bazzillion feet long so you can do departures at Max Gross for just about any type.

I was watching the weather channel today and it looked like the weather was pretty nice all over, but Hotlanta still had 45 min delays (and Ohare had 15 mins. There were no other delays in the lower 48.) Having said that, it is the 17th biggest airport in the US and it's half the size of the next one up, so who knows. (Sure would like to meet this "who" guy. Must be a genius.)

As for the seniority merge, since NW and DL are both ALPA carriers it would have to go through the ALPA merger policy. Don't know how that would work exactly, but I think it would be a percentage type deal. (2 DL, 1 NW, 2 DL, 1 NW etc.)

Were probably wasting our time talking about this, but it's an interesting possibility, however unlikely.

Regards,
Tref

 

[jetflier]

I'm pretty sure no one can aquire Continental without NWA's consent. That was part of the stock buy back deal when NWA had to sell a bunch of the Continental stock a few years ago.

There was a rumour awhile back about Continental aquiring Delta because they can buy someone else, they just can't be bought (without NWA's consent.) Seemed kinda crazy at the time, but I'm starting to believe that anything's possible in this industry.

When Richard Anderson was still CEO of NWA, he said that most of the efficiencies of a merger can be achieved through code sharing (which they are doing) without all of the costs/complications.

One factor to consider now though, is that it looks like the only way Wall Street is going to give a US airline any cash is through a merger scenario. They aren't willing to subsidize more losses but are willing to gamble on a possible shift in the status quo.

As to a possible Delta/Northwest combo, I heard a guy come up with the new name: "Delta" from Delta Airlines and "Airlines" from Northwest Airlines. Hope that never happens, but it was good for a laugh.

Here's the latest from NWA...........This is after one of the two "Beach Boys", ( they bought NWA in 1986)

Gary Wilson sold off most of his stock ownership in NWA and coincidently an investment banking firm with deep pockets bought most of the stock at a historically low price.....here's the article......

 

[jetflier]

Even though the fleet types are different, I see DL/NW. There are really no overlapping routes or hubs, and that is what helped with the AWA/US merger. DL and CO both have large hubs in NYC, and DL owns the Shuttle in LGA. That would be a monopoly, and something would have to go. Neither wants to give up a hub like that, and I think each has major obligations to the Port Authority anyway. (maybe CAL has an obligation to the State of NJ or Newark itself for the new terminal) I see CAL and United merging----with a perfect mix of INTL routes, and NW/DL would have the same (DL---Europe and South America, and NW with Asia). I predict it will be called Delwest. (better than Northta) And, I think ASA will merge with Pinnacle, and Comair will be sold to Mesa. (JMO)


Bye Bye--General Lee

Ahhh Gen Lee you left out "Nordel Airlines" and "Delnor Airlines"......
Then we could hane "RD"'s and "RN"'s........bring on the enemas!!!

 

[FutureTEDpilot]

UAL and CAL

 

[NuGuy]

Nu,

I have a feeling MEM would be gone in a DL/NW merger. MEM and CVG are too close to the other major hubs, and I would think that they would be chopped. CVG is mainly a Comair base anyway, so they would have to put them all in JFK or GSO. MEM is too close to ATL. Both of those bases are mainly RJ bases anyway, so no major mainline displacements. I am sure there would be fences around aircraft and bases for a few years anyway. I would think you NW guys would like this merger, we don't have more than 500 pilots over 50 years old now. I would hope it would be a percentage merger versus a DOH merger, or we would all be $crewed.......Just a guess, though....maybe....maybe not....


Bye Bye--General Lee

Hi General...I suspect that in any merger we'll all get $crewed while management takes some golden parachutes.

Nu

 

[Tref]

Hi General...I suspect that in any merger we'll all get $crewed while management takes some golden parachutes.

Nu

NuGuy,


I believe you have cracked the code!

 

[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.