Oh WAIT!!! An Analcyst says a DL/NWA merger could still happen....article

[IXLR8]

Really? After all of the articles stating the deal could die, and now an analcyst states that he thinks there is a 70-80% chance there could be a deal, that isn't something new? Okay.....

Bye Bye--General Lee

Really. What is new?...the deal is on again?...big announcement next week?...come on...okay....

 

[filejw]

You guys should love this. Steenland is trying to get his Texas money boys together for a buyout..some of the stuff that runs around in a crew room....... Most likely totally BS but this is a place for rumours. LOL...

 

[Redmeat]

You guys should love this. Steenland is trying to get his Texas money boys together for a buyout..some of the stuff that runs around in a crew room....... Most likely totally BS but this is a place for rumours. LOL...

The version I heard was a total NWA liquidation followed by Delta "purchasing" everything.

Everyone would be given a face to face interview and rehired (bad apples excluded) by Delta on the spot.

Can you say kiss negotiations goodbye?

Gonna get intersting.

 

[On Your Six]

It reminds me of that scene in Airplane II when someone refers to the "boys on the board" and you see a bunch of kids in a boardroom. Me thinks this thing ain't over if the pilots don't come to an agreement. The boys on the board won't want to miss the opportunity.

 

[DrewBlows]

"First, there's the overall flight route fit. Delta and
Northwest have only 10 or 12 cities pairs that overlap, so
from a destination coverage standpoint, the deal is very
attractive," Bauer said. "Second, the new company will have
massive economies of scale and will be a force in the new
global market. This will be a profitable airline."

"Third, unlike typical deals which usually involve mega lay-
offs, this one won't because of solid passenger demand and
prospects for international travel growth," Bauer said.
"There will be some cutting of managers and shifting of
employees here and there, but anyone anticipating a 20,000
employee lay-off is mistaken. In fact, after a consolidation
period, the new Delta/Northwest is likely to add employees
as passenger traffic grows."

Am I the only one that doesn't see the benefit of economies of scale from a merger?

The analyst says there will be economies of scale but there won't be huge layoffs. If there won't be huge layoffs, where are the economies of scale?

Will a larger company be able to negotiate better rates on fuel?

No.

Will labor costs be lower at a larger company?

No. In fact they'll be higher if there are no layoffs.

The only savings I see are operational consolidation at the few cities that each serve, elimination of one headquarters (which will cost the new company $245 million in penalties), and consolidated parts inventory of common fleets (B757, whoop tee do!).

A combined company would benefit from a larger network so the consumer could do "one stop shopping", but they already code share with one another so there isn't a large gain there.

In my opinion a merged company would be slightly better off than separate companies (unless there are huge layoffs). Perhaps they wouldn't lose as much during downturns and would make a little more during up-ticks. Any real benefit of a merger is in "synergies" as in layoffs.

 

[Redmeat]

The only savings I see are operational consolidation at the few cities that each serve, elimination of one headquarters (which will cost the new company $245 million in penalties), and consolidated parts inventory of common fleets (B757, whoop tee do!).

.

Closing MEM will save the combined company 500 mil PER YEAR. Closing CVG will save the combined company 1 BIL PER YEAR.

total savings from this alone for the combined company 1.5 Billion PER YEAR.

 

[DrewBlows]

Closing MEM will save the combined company 500 mil PER YEAR. Closing CVG will save the combined company 1 BIL PER YEAR.

total savings from this alone for the combined company 1.5 Billion PER YEAR.

Right, that would require huge layoffs. You can't have it both ways.

 

[Redmeat]

Right, that would require huge layoffs. You can't have it both ways.

I don't think so. MEM is primarily AIRLINK people for NWA. CVG is primarily contract employees (from what I understand).

Yes, these people would most likely be looking for jobs but they are not NW/Delta employees.

 

[ironspud]

Delta-Northwest Merger Destined for a Rocky Landing According to NYU Stern Professor

Friday February 29, 9:16 am ET

NEW YORK--(BUSINESS WIRE)--Corporate merger expert NYU Stern Professor Robert Lamb argues that the Delta-Northwest merger looks great on paper, but is probably doomed to fail.
“Combining Delta’s southern and European routes and Northwest’s northern and Asian routes might make for a pretty map, but joining these two aging airline giants is more likely to be an indirect flight to failure,” remarks Professor Lamb.
As cited in his book, Capitalize on Merger Chaos: Six Ways to Profit from Your Competitors' Consolidation on Your Own, co-authored with Thomas M. Grubb, 60 to 80 percent of mergers failed over the last 50 years.
He argues:

• <LI class=bwlistitemmarginbottom>Focusing inward on integration of Delta & Northwest will negatively affect their profit. <LI class=bwlistitemmarginbottom>The skills of employees from each company are not necessarily transferable. <LI class=bwlistitemmarginbottom>The lack of a strategically powerful merger plan will lead to chaos and uncertainty, and both companies’ most valuable resources—their best people—will probably flee. <LI class=bwlistitemmarginbottom>The size of these two airlines combined creates the largest US airline, which poses a threat, according to studies indicating that larger companies are historically the least successful in mergers. <LI class=bwlistitemmarginbottom>Most companies don’t know the statistics on merger failure and let egos alter their judgment when determining how much the enterprise can afford to pay and how much they will recoup. <LI class=bwlistitemmarginbottom>Union issues may delay the merger, causing airline executives to focus too much on internal operations, and not enough on competitors.
• A significantly more profitable merger would result from a joint venture between either Delta or Northwest and a strong foreign airline.

 

[Redmeat]

NYU Stern Professor Robert Lamb

Another "airline expert" who instead of being hired as a CEO decided to be a professor at a University.

How's that saying go? Those that can...do. Those that can't...teach.

 

[DrewBlows]

I don't think so. MEM is primarily AIRLINK people for NWA. CVG is primarily contract employees (from what I understand).

Yes, these people would most likely be looking for jobs but they are not NW/Delta employees.

You are wrong. Delta has a very larger presence in CVG. Delta aircraft are served by Delta gate agents and Delta rampers. Comair has a very large presence as well, but doesn't serve any Delta mainline flights. I don't know what goes on in MEM, but I suspect mainline aircraft are served by mainline employees.

Synergies equal layoffs, there is no getting around it. When companies merge they say there will be no layoffs to placate politicians, but when the rubber hits the road and "unforeseen circumstances" arise people lose their jobs.

 

[another cfii]

Don't forget that NWA has already laid off if not all, but most of its gate agents. Only NWA gate agents left are at its main hub (MSP, MEM & DTW) and a handful of key cities, i.e. LAX, LGA, SEA...

 

[AA717driver]

Face it, mergers these days are about making huge bucks for the lawyers and management types and the funds that back them.

There is no pot of gold at the end of the rainbow for the employees. Sure, a few will profit but not greatly. "Synergies" is code for layoffs and headcount reduction.

Beware and learn from history. TC