[SIZE=+2]Potential airline partnerships[/SIZE]
[SIZE=-1]08:03 AM CDT on Tuesday, October 18, 2005[/SIZE]
Is a wave of consolidation coming for the airline industry? Dallas Morning News airline writer Eric Torbenson takes on some of the speculation about possible matchups for major carriers:
With $3.3 billion in cash, American parent AMR Corp. has the strongest balance sheet among traditional carriers. However, it's still trying to fully digest the assets of Trans World Airlines it purchased in 2001, and its leaders appear to have no appetite to try to swallow anything else.
Merger with Alaska Airlines: American would solidify a hole in its West Coast network by acquiring the profitable Alaska, but it would be very expensive. Alaska doesn't need to be bought out.
Merger with United Airlines: It would make antitrust regulators choke. But combining the No. 1 and No. 2 carriers would, by some experts' view, solve the overcapacity problem and strengthen the whole industry. But United, which sees itself as an acquirer, isn't likely to let it happen.
Merger with Northwest Airlines: Northwest has what American and many other carriers want: a strong Asian route network where fares have really rebounded. Northwest also has things American wouldn't want: poisoned labor relations, a glut of very old aircraft and a troubled hub in Memphis.
Southwest hadn't entertained a merger of any type since acquiring Morris Air in 1993. But chief executive Gary Kelly surprised many when Southwest rescued ATA Airlines late last year with a bankruptcy loan and an alliance.
Merger with AirTran Airways: These two don't like each other, and Southwest has little use for a network-style carrier with a beefy presence in Atlanta, but you never know. AirTran has sexy cost containment and is getting Boeing planes that could match up with Southwest's Boeing 737 fleet, and you never say never.
Merger with Alaska Airlines: Some fleet commonality and Alaska's West Coast network present interesting options on paper, but it would give Southwest such command of the top Western markets that it would raise antitrust concerns.
Merger with ATA Airlines: Southwest has mild interest in ATA's relatively new Boeing planes, and ATA may not see the end of the year because of high fuel costs and dwindling cash. If ATA liquidates, Southwest may scavenge here.
United chief executive Glenn Tilton got the industry's attention earlier this year when he outlined the need to consolidate and his interest in being the airline that acquires others. That's an aggressive outlook for a carrier that will have spent more than three years in bankruptcy.
Merger with Delta Air Lines: The fleets aren't a perfect fit, but Delta could benefit from United's Asia network, and both carriers like to use Boeing 777s. The pilots for both carriers are represented by the same union. Still, other unions could clash.
Merger with US Airways: They tried it before, but today's US Airways – fresh off its own merger with America West – now is more appetizing in many ways. US Airways' strong north-south connections on the East Coast would blend well with United's east-west route map.
Merger with Northwest: The two biggest players to Asia would have an extra-large regulatory hurdle to leap over, and the two carriers' hubs don't particularly mesh well, but United could cherry-pick Northwest's best assets.
Continental executives believe they're flying the premium full-service airline today and have very little regard for their struggling brethren. Continental's problem is cash; analysts believe the carrier is heading into a liquidity crunch because of high fuel prices.
Merger with Northwest: They're already in a longtime alliance, but there's a poison pill that makes the deal very difficult. A combination of the Nos. 5 and 4 airlines would marry Northwest's strong Asian routes with Continental's money-making hub at Newark, N.J. But the labor showdown would be pay-per-view worthy.
Merger with Delta: Their fleets mix fairly well, but there aren't appealing network pairings here because both carriers still don't get to Asia other than through their Northwest alliance connections.
Merger with both Northwest and Delta: A veritable "full employment act" for investment bankers, consultants and anti-trust lawyers, the chances of this mega-deal going down are very slim because regulators would balk at combining the three into an airline that would be larger than American. Properly financed, a new juggernaut could emerge that has everything – top hubs, enviable international connections, the newest planes and even a little pricing power against low-cost carriers. But the hurdles to this deal would be measured in miles.
Merger with United: A favorite of merger-guru analyst Vaughn Cordle, this combination might get too much regulatory interest but combines the attractive Asian flying of United with Continental's rock-solid European launching point at Newark. It would be an interesting struggle to see which management team would eventually run such a combination.
DELTA AIR LINES
Both just entered bankruptcy protection and are busy cutting costs, leaving merger activity a distant priority. Experts say both have some appeal to carriers; if fuel prices overwhelm either, both have assets that many would line up to bid on.
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