General Lee
Well-known member
- Joined
- Aug 24, 2002
- Posts
- 20,442
Delta May Be Dealt Blow By D.C.
Carl Gutierrez, 01.15.08, 3:00 PM ET
Washington my ground Delta's merger hopes.
A week after Delta Air Lines (nyse: DAL - news - people ) soared on a report that the company will combine with either United Air Lines parent UAL (nasdaq: UAUA - news - people ) or Northwest Airlines (nyse: NWA - news - people ), investors learned on Tuesday that the Atlanta-based airline has begun merger talks with both suitors, and hopes to reach an agreement within the next two weeks.
Shares of Delta rose 3.5%, or 54 cents, to $15.84, in afernoon trading, while Northwest lifted 8.1%, or $1.29, to $17.30, and UAL gained 3.1%, or $1.10, to $34.03.
Tuesday’s news, first reported by the Wall Street Journal, said Delta’s board gave Chief Executive Richard Anderson permission on Friday to hold talks with both carriers simultaneously.
Delta hopes to present a preferred partner when its board meets next, in early February, with an announcement coming as soon as mid-February, according to the report.
Calyon Securities analyst Raymond Neidl said the outcome is entirely dependent upon Washington and whether or not it believes such a merger could pass antitrust standards.
“Delta’s serious about wanting to begin talks, and Northwest and United both like to be wooed, but we need a sign from Washington that they’d give their blessing,” Neidl said.
Looking at the broarder climate in the sector, Neidl said that investors view potential mergers positively because they believe that the industry is too fragmented, noting that American Airlines parent AMR is the largest with only a 17% market share.
"Many believe carriers are operating inefficiently, with too many expensive hubs and a lack of ticket price discipline because of over-capacity," Neidl said. "Furthermore, in an atmosphere of record high fuel prices and a slowing economy, we believe mergers would bring better operational discipline."
In late-August, Neidl analyst noted key players in the industry were looking to consolidate, and that Delta’s hiring of Richard Anderson, a proponent of consolidation, as CEO, as well as the elevation of Chief Financial Officer Ed Bastian to president, indicated that the airline was preparing for industry consolidation (See “Mergers Could Ignite Airline Stocks”).
In November, Delta and UAL shares soared after hedge fund Pardus Capital Management tried to push the two together (See "Airlines May Be On Course To Combine").
Pardus Capital, which owns 3 million shares, or 1.3%, of Delta and 5.6 million shares, or 5%, of United, sent a letter to Delta's management stating that it is "imperative" that the airline merge with another due to soaring oil prices, up 55% year-to-date, and the increased risks of going it alone.
Bye Bye--General Lee
Carl Gutierrez, 01.15.08, 3:00 PM ET
Washington my ground Delta's merger hopes.
A week after Delta Air Lines (nyse: DAL - news - people ) soared on a report that the company will combine with either United Air Lines parent UAL (nasdaq: UAUA - news - people ) or Northwest Airlines (nyse: NWA - news - people ), investors learned on Tuesday that the Atlanta-based airline has begun merger talks with both suitors, and hopes to reach an agreement within the next two weeks.
Shares of Delta rose 3.5%, or 54 cents, to $15.84, in afernoon trading, while Northwest lifted 8.1%, or $1.29, to $17.30, and UAL gained 3.1%, or $1.10, to $34.03.
Tuesday’s news, first reported by the Wall Street Journal, said Delta’s board gave Chief Executive Richard Anderson permission on Friday to hold talks with both carriers simultaneously.
Delta hopes to present a preferred partner when its board meets next, in early February, with an announcement coming as soon as mid-February, according to the report.
Calyon Securities analyst Raymond Neidl said the outcome is entirely dependent upon Washington and whether or not it believes such a merger could pass antitrust standards.
“Delta’s serious about wanting to begin talks, and Northwest and United both like to be wooed, but we need a sign from Washington that they’d give their blessing,” Neidl said.
Looking at the broarder climate in the sector, Neidl said that investors view potential mergers positively because they believe that the industry is too fragmented, noting that American Airlines parent AMR is the largest with only a 17% market share.
"Many believe carriers are operating inefficiently, with too many expensive hubs and a lack of ticket price discipline because of over-capacity," Neidl said. "Furthermore, in an atmosphere of record high fuel prices and a slowing economy, we believe mergers would bring better operational discipline."
In late-August, Neidl analyst noted key players in the industry were looking to consolidate, and that Delta’s hiring of Richard Anderson, a proponent of consolidation, as CEO, as well as the elevation of Chief Financial Officer Ed Bastian to president, indicated that the airline was preparing for industry consolidation (See “Mergers Could Ignite Airline Stocks”).
In November, Delta and UAL shares soared after hedge fund Pardus Capital Management tried to push the two together (See "Airlines May Be On Course To Combine").
Pardus Capital, which owns 3 million shares, or 1.3%, of Delta and 5.6 million shares, or 5%, of United, sent a letter to Delta's management stating that it is "imperative" that the airline merge with another due to soaring oil prices, up 55% year-to-date, and the increased risks of going it alone.
Bye Bye--General Lee
