From The Wsj

[lowecur]

Delta Board to Consider
Merger With Northwest, UAL

By SUSAN CAREY, DENNIS BERMAN and PAULO PRADA

January 10, 2008 2:58 p.m.

Delta Air Lines Inc. directors on Friday will be asked to permit the airline's new chief executive, Richard Anderson, to begin formal merger discussions with both Northwest Airlines Corp. and UAL Corp., parent of United Airlines, with the idea that Delta ultimately will choose between the two, according to people familiar with the matter.

That process, if it gets the green light, would follow exploratory conversations Delta had in December with both of those airlines as well as Continental Airlines Inc., according to another person with knowledge of the situation.

Of course, Delta's board may decline the request, or send Delta executives back to do more work, or only approve talks with one carrier. And if formal merger talks do commence, they may not wind up with a deal, given the challenges of combining carriers.

If Delta does embark on a two-track evaluation process with United and Northwest, that could force Continental onto the merger dance floor to avoid being left behind, according to several people familiar with the situation. Continental has repeatedly rebuffed earlier efforts by United to form a combination.

Delta's management and a special board committee, formed a few months ago to explore strategic opportunities, haven't decided whether United or Northwest would be the more attractive potential partner, said one person close to the situation.

The board, however, "is not necessarily of one mind about it," said one person familiar with Delta directors. "It is their fiduciary responsibility to consider the possibility as they promote and protect shareholder value. But there is not necessarily a predirection toward consolidation."

A Delta deal would be a stock-for-stock share swap at around "at-market" prices, says one person familiar with the matter.

Consolidation has taken on new urgency because carriers believe the chances of getting one or two big deals approved by antitrust authorities are better under the current Republican administration. Thus airline executives and investors feel deals must be forged in the next 30 to 45 days to allow enough time to let the transactions undergo scrutiny this year before the government changes.

 

[On Your Six]

Even if the legacies agree to merge, watch how long it takes with the many hearings and aviation subcomittees to fully explore the IMPACT on consumer choice and competition. It will take a long, long time. Plus, with a Democratic Congress, you will see a lot of pressure to reduce any job reductions - especially in the politicians' districts. Isn't Pelosi from San Francisco (UAL hub)? Why even do a merger if you can't reduce costs and bolster efficiencies (reduce redundancies)? Jobs would always be on the line.

Main point: don't expect smooth sailing with any of the politicians when jobs are at stake... Any agreements could take a long, long time to complete (if they are approved at all).

 

[jke406]

A Delta deal would be a stock-for-stock share swap at around "at-market" prices, says one person familiar with the matter.

is that "merger" or "acquisition?"

 

[get2flyin]

But, but, but.......what about, "keep Delta my Delta"?

 

[jke406]

But, but, but.......what about, "keep Delta my Delta"?

Haven't you heard? The only thing that matters are payoffs for execs and private equities.

I think the only thing an airline exec believes is:
"Keep Money my Money"

Enjoy it while you can, you bastards. some day soon, you may find hell to be hotter and more infinite than you imagined.

 

[michael707767]

But, but, but.......what about, "keep Delta my Delta"?

I believe Delta wants to stay independent. I think the drive to merge is coming from investors and not from management.

 

[jke406]

I believe Delta wants to stay independent. I think the drive to merge is coming from investors and not from management.

that's what happens when you sell your soul to private equity to emerge from bankruptcy.

And Delta thought they could somehow cancel their monetary obligations without some serious repercussions.

 

[Zipperhead]

Wait for General Lee to post that it will NEVER happen and Delta is the best airline in history and who they merge/consolidate with, Delta will and should staple everyone and all Delta pilots should get widebody bids and on, and on, and on......

Must be fliyn or he would have posted it already.....

 

[lowecur]

I believe Delta wants to stay independent. I think the drive to merge is coming from investors and not from management.

Explain to me who Anderson sides with? Didn't the BOD hire him?

If the majority of mgt truly wants to remain independent, then Anderson is just a shill for the BOD and investors.

I'm sure there is a slice of DL mgt that wants to remain a proprietary company, but I also think most believe that they would rather be proactive than reactive if the economy sinks and open skys kills revenue. DL is really skewed to get screwed if an attritionary fare war developes over the Atlantic.

Just my 43 cents.

imp: ​

 

[lowecur]

All the crap about looking at the various entities is just that. I would be absolutely shocked if the BOD wastes anymore time having the committee exercize more due dilegence before making a recommendation.

It's a no-brainer....and it's NWA. If they pull a two track evaluation of NWA/UAL, it's just all fluff to give the impression that they are doing their job. I still see a decision on who by the end of the month.

imp:​

 

[General Lee]

Wait for General Lee to post that it will NEVER happen and Delta is the best airline in history and who they merge/consolidate with, Delta will and should staple everyone and all Delta pilots should get widebody bids and on, and on, and on......

Must be fliyn or he would have posted it already.....

Sorry, I was just thinking about you, and then I took a dump....


Here is the full article above:



Delta Board to Consider
Merger With Northwest, UAL

By SUSAN CAREY, DENNIS BERMAN and PAULO PRADA
January 10, 2008 2:02 p.m.

Delta Air Lines Inc. directors on Friday will be asked to permit the airline's new chief executive, Richard Anderson, to begin formal merger discussions with both Northwest Airlines Corp. and UAL Corp., parent of United Airlines, with the idea that Delta ultimately will choose between the two, according to people familiar with the matter.

That process, if it gets the green light, would follow exploratory conversations Delta had in December with both of those airlines as well as Continental Airlines Inc., according to another person with knowledge of the situation.

Of course, Delta's board may decline the request, or send Delta executives back to do more work, or only approve talks with one carrier. And if formal merger talks do commence, they may not wind up with a deal, given the challenges of combining carriers.

If Delta does embark on a two-track evaluation process with United and Northwest, that could force Continental onto the merger dance floor to avoid being left behind, according to several people familiar with the situation. Continental has repeatedly rebuffed earlier efforts by United to form a combination.

Delta's management and a special board committee, formed a few months ago to explore strategic opportunities, haven't decided whether United or Northwest would be the more attractive potential partner, said one person close to the situation.

After Delta successfully rebuffed a $9.5 billion hostile takeover attempt by US Airways Group Inc. early last year, the creditors who hand-picked Delta's post-bankruptcy board urged the airline's new directors to remain open to future opportunities for consolidation. That's why the board, after hiring Mr. Anderson, an industry veteran with experience at Northwest and Continental, established the committee to explore strategic options, including mergers and acquisitions.

The board, however, "is not necessarily of one mind about it," said one person familiar with Delta directors. "It is their fiduciary responsibility to consider the possibility as they promote and protect shareholder value. But there is not necessarily a predilection toward consolidation."

Betsy Talton, a Delta spokeswoman, repeated that "a special committee of Delta's board" is working to "review and analyze strategic options ... including potential consolidation transactions." The company, however, "will not be providing updates on the process," she added.

Mr. Anderson could not be reached for comment.

A Northwest spokeswoman declined to comment. A United spokeswoman said her company's "position on the need for consolidation in the industry is well known," but declined to comment on rumors or speculation. Continental officials were not immediately available to comment.

Delta stock early today was trading at about $14 per share, giving the airline a market value of about $3.6 billion, based on shares that are currently trading. The airline's total value, however, is calculated to be more than $5 billion at current prices, considering some Delta shares, equal to about a quarter of the company's total stock, must still be distributed once some remaining bankruptcy claims get settled.

A Delta deal would be a stock-for-stock share swap at around "at-market" prices, says one person familiar with the matter.

Fresh Consolidation Efforts

Renewed efforts to consolidate the fragmented U.S. airline industry come at a time when high fuel prices are sapping carriers' newfound prosperity, the economy is slowing and competition from European airlines is increasing as a result of a new "open skies" treaty set to take effect in late March between the U.S. and the European Union. U.S. airlines' stocks have slumped to their 52-week lows and hedge funds that bought airline stocks on the hopes that mergers or asset spinoffs would lift those investments are frustrated and increasingly vocal.

Consolidation has taken on new urgency because carriers believe the chances of getting one or two big deals approved by antitrust authorities are better under the current Republican administration. Thus airline executives and investors feel deals must be forged in the next 30 to 45 days to allow enough time to let the transactions undergo scrutiny this year before the government changes.

Proponents think airline mergers would take excess capacity out of the industry, particularly domestically, and allow the players to further boost fares. Combinations also are seen as a way of further reducing costs by rationalizing duplicative information technology systems, headquarters and closing some hubs. They also can help broaden the combining airlines' network coverage, enabling them to better compete for corporate accounts.

Despite those economic arguments, however, any combinations of the major U.S. airlines are sure to draw heavy regulatory scrutiny because of the impact on fares and competition. United and Delta are the second- and third-largest carriers by traffic. Northwest is No. 5 and Continental fourth.

But the big airlines argue that discounters such as Southwest Airlines Co. and JetBlue Airways Corp. ensure hearty competition in the domestic market. International competition also is growing, not just from Europe but due to the growth of mega-airlines in the Middle East and Asia.

A spokeswoman for Continental declined to comment.

Labor Concerns at Issue

Labor concerns would be another large obstacle. Mergers of airlines involve integrating employees' seniority lists, which govern assignments, vacation and pay. Workers at US Airways and America West Airlines, which merged more than two years ago, still are fighting over the issue, preventing the successor carrier from melding the work force and causing poor morale and more complex staffing.

Delta has only one large unionized work force, its pilots. But United and Northwest are heavily unionized. All three carriers have been through bankruptcy reorganizations that resulted in lower pay, reduced benefits and tougher work rules. So employees aren't eager to be put through the wringer a merger could represent, and airline executives increasingly are coming to think that they would have to win labor support for a combination to work.

The chief of the Air Line Pilots Association at Delta, Lee Moak, said in a letter to his members earlier that week that Delta "may soon be involved in some form of industry consolidation." He said his group doesn't oppose consolidation but warned that any attempt "will fail without the active involvement and support of the pilots from the earliest formative stages of the effort."

Mr. Anderson joined Delta in September as CEO. He quickly signaled that he believes consolidation could benefit Delta by generating value for shareholders and employees, especially in the current climate of high fuel prices. That was a big switch for Delta, which fought hard to reject US Airways' hostile bid just months before. Glenn Tilton, UAL's CEO, has been advocating consolidation for several years, and United has tried without success to interest both Delta and Continental in a tie-up. Doug Steenland, CEO of Northwest, said in October that the trend is inevitable.

Hedge fund Pardus Capital Management LP, which holds shares in Delta and UAL, in November sent letters to managements of both those carriers advocating a merger between them. Shortly after Pardus made public its letter to Delta, itself a followup to a September missive, Mr. Anderson announced that Delta recently had established a special board committee to evaluate merger possibilities and "review and analyze strategic options to ensure Delta maintains its leadership position in the airline industry."



Bye Bye---General Lee

 

[Gunfighter]

But, but, but.......what about, "keep Delta my Delta"?

This isn't the same type of acquisition as the US Scareways deal that started the "Keep Delta My Delta" campaign. Delta is the initiator of the acquisition.

Look for a modified slogan like..
-Keep Delta growing.
-Keep Northwest my Delta.
-Keep United my Delta.
-Keep Delta, add NWA
-Keep Delta, add UAL

Delta has a good management team (by airline standards). They actually seem interested in running a profitable airline. UAL is run by a CEO who is trying to unload the company, so he can quit his job.

This is a much different scenario that the last Delta merger.

 

[reepicheep]

But, but, but.......what about, "keep Delta my Delta"?

I think that was more about "No only no but hell no we aren't getting usair cancer here" than it was about keeping Delta Delta.

 

[lowecur]

Sorry, I was just thinking about you, and then I took a dump....


Here is the full article above:



Bye Bye---General Lee

Oh Stewie, you're so anal.

imp:​

 

[BILL LUMBERG]

Ya know.....A USAir East guy with a ton of class came up to me on the hotel bus when Doogie Parker and his "synergies" were floated and said "I hope you don't think it's us that wants this, it's our stupid management....."

I echo his sentiments now.....

Mergers won't solve oil prices or too many RJ's