Merger Speculations

hotwing

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[SIZE=+2]Potential airline partnerships[/SIZE]
[SIZE=-1]08:03 AM CDT on Tuesday, October 18, 2005[/SIZE]
[SIZE=-1][/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:

AMERICAN AIRLINES
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.
Interesting combinations:
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 AIRLINES
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.
Interesting combinations:
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 AIRLINES
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.
Interesting combinations:
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 AIRLINES

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.
Interesting combinations:
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.

NORTHWEST AIRLINES
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.

E-mail etorbenson@dallasnews.com

[FONT=Arial, Helvetica, sans-serif]Online at: http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-airbox_18bus.ART.State.Edition2.e6b7ba6.html[/FONT]
 

LAXSaabdude

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hotwing said:
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:

AMERICAN AIRLINES
Merger with Alaska Airlines: American would solidify a hole in its West Coast network
And then promptly punch a new hole in that network again as it dismantles their route structure!

LAXSaabdude.
 

80drvr

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LAXSaabdude said:
And then promptly punch a new hole in that network again as it dismantles their route structure!

LAXSaabdude.
Agree with LAXSaabdude.

AA buys Air Cal to fill a hole in its West Coast network and promptly dismantles it.

AA buys Reno Air to fill a hole in its West Coast network and promptly dismantles it.

Think AA needs to buy Alaska to fill a hole in its West Coast network?
 

Phaedrus

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I think Chuck would be disappointed that the AirTran/MidEx merger wasn't mentioned in that article:)
 

General Lee

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UNITED AIRLINES
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.
Interesting combinations:
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.


Read that last sentence. What other unions at Delta? This guy has no clue.


Bye Bye--General Lee
 

FlyBoeingJets

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hotwing said:
SOUTHWEST AIRLINES
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.
Interesting combinations:
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.
This guy really is clueless. ATA leases their airplanes at relatively high rates. How could SWA gain anything by assuming the leases?

Airtran a network carrier?? Kind-a-sorta but not really. Alaska is the network carrier in this example.

This guy is going to hurt himself. Somebody stop him!
 

HalinTexas

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ATA leases their airplanes at relatively high rates.
Someone like SWA can get those renegotiated for better terms, or go straight to Boeing, or someone else, for others.
 

Spectre

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CAL merger? This guy is clueless. I believe NWA can vote on who CAL gets to merge with as they used to own a big chunk of CAL.
 

Truckdriver

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This Dallas Morning New airline guy is worse than CNN's aviation expert Miles O'Brien. I didn't think I would ever see a more clueless expert than Miles, but I just read an article by possibly the most clueless aviation expert in all of the aviation expert world.
 

mach none

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I think Alaska will buy someone in the near future. Aloha? Frontier? A merger with southwest would be very interesting, but I doubt it.
 

densoo

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hotwing said:
[Continental] 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.
What? Doesn't CAL fly Norita and Hong Kong from Newark, maybe Houston too. And they have HUB for crying out loud in Guam.
 

humuakalaka

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Phaedrus said:
I think Chuck would be disappointed that the AirTran/MidEx merger wasn't mentioned in that article:)
From what I've heard, this is the most likely possibility.

Anther possiblility is a purchase of Hawaiian for their 717's.

mach none said:
I think Alaska will buy someone in the near future. Aloha? Frontier? A merger with southwest would be very interesting, but I doubt it.
I doubt that Alaska would buy Frontier. To begin with, the fleet types are completely different and not much would be gained from buying another airline that is focused mostly on the West coast. I also think it's very unlikely that SWA would buy Alaska. Alaska is not a huge threat to SWA though it's feasible that SWA could be interested in their subsidized routes in the state of Alaska.

Speaking of Alaska Airlines, another likely merger candidate for AirTran is Alaska. Currently AAI's market cap is approximately 50% higher than Alaska's. Additionally, AAI is preparing several hundred million dollars worth of additional stock offerings. If this merger were to occur, it would probably happen in much the same way as the HP/US Air merger with outside investors and probably Boeing in this case playing a major role in the financing. The synergies of this merger seem like they would be very attractive to ouside investors: two very complementary route structures, two very similar fleet types and almost identical fleet sizes, and two similar pay-scales. It would immediately become a 200-plus aircraft airline with a major national presence that would provide a significant threat to SWA. Within just a few years it would grow to approximately 400 airplanes if both companies excercised all of the options currently on their books. It would have the potential to become the dominant domestic airline.

The drawback to this deal is that both Alaska and AirTran want very badly to be the surviving carrier. It may be very difficult to work through that issue.
 
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