UAL chief says industry mergers still possible
By John Crawley
WASHINGTON (Reuters) - A failed bid by US Airways Group Inc. (LCC.N) for bankrupt Delta Air Lines Inc. (DALRQ.PK) has not dimmed the outlook for airline mergers, the chief executive of UAL Corp.'s (UAUA.O) United Airlines said on Thursday.
"Nothing has changed, as far as I am concerned in the context of the case for consolidation," Glenn Tilton told reporters after a speech to a Federal Aviation Administration conference.
Some experts have forecast there would be less pressure on airlines to merge after US Airways failed in its hostile takeover attempt of larger Delta.
Tilton, who runs the second-largest U.S. airline, has long been an outspoken advocate for consolidation in a fiercely competitive industry where low-fare companies have put enormous pressure on bigger rivals, such as United, to overhaul their businesses.
Tilton said it remained possible that healthy carriers could still merge even though the last two airline consolidation bids involved at least one bankrupt company. The current US Airways is a combination of America West Airlines and the old US Airways, which was rescued from certain failure.
US Airways CEO Doug Parker, who engineered the 2005 US Airways deal as chief executive of America West and attempted to buy Delta, said on Wednesday that consolidation is needed but unlikely as the industry mounts a recovery.
Tilton did not discuss any consolidation plans that United might have or make any forecast about who might attempt to merge next.
There has been some speculation that United and Continental Airlines (CAL.N) might be interested in a deal, or that United might look at an overseas partner. Delta and Northwest Airlines Corp. (NWACQ.PK) both plan to step out of Chapter 11 protection this year as stand alone companies.
The airline industry has shown signs of improvement in the last year due to capacity cuts that have allowed airlines to raise fares and cost cutting that has permitted them to keep more of what they charge.
And the industry continues to grow following several years of declines triggered by the September 11, 2001, hijack attacks. The FAA forecast on Thursday that commercial carriers are on track to carry 1 billion passengers a year by 2015.
Washington (Dulles), New York's John F. Kennedy airport, Los Angeles international and Atlanta Hartsfield are expected to see significant growth in the coming years, the Transportation Department projected. United has hubs in Los Angeles and at Dulles.
But Tilton said in his speech that domestic network airlines are financially stable, but not yet healthy after major restructuring since 2002. United completed a three-year bankruptcy a year ago.
"While most U.S. carriers are returning to some level of profitability, we are not yet earning our cost of capital and we are not in a position to make the level of investment undertaken by our international competitors," Tilton said.
He noted that United's Star alliance partner, Japan's All Nipon Airways Co. Ltd. (ANA) (9202.T), has ordered more next generation Boeing Co. (BA.N) 787 aircraft, 50, than all U.S. carriers combined.
UAL shares closed up $1.08, or 2.8 percent, at $38.90 on Nasdaq. Other major airlines also closed higher.
(Additional reporting by Kyle Peterson in Chicago)
03/15/07 18:15 ET
By John Crawley
WASHINGTON (Reuters) - A failed bid by US Airways Group Inc. (LCC.N) for bankrupt Delta Air Lines Inc. (DALRQ.PK) has not dimmed the outlook for airline mergers, the chief executive of UAL Corp.'s (UAUA.O) United Airlines said on Thursday.
"Nothing has changed, as far as I am concerned in the context of the case for consolidation," Glenn Tilton told reporters after a speech to a Federal Aviation Administration conference.
Some experts have forecast there would be less pressure on airlines to merge after US Airways failed in its hostile takeover attempt of larger Delta.
Tilton, who runs the second-largest U.S. airline, has long been an outspoken advocate for consolidation in a fiercely competitive industry where low-fare companies have put enormous pressure on bigger rivals, such as United, to overhaul their businesses.
Tilton said it remained possible that healthy carriers could still merge even though the last two airline consolidation bids involved at least one bankrupt company. The current US Airways is a combination of America West Airlines and the old US Airways, which was rescued from certain failure.
US Airways CEO Doug Parker, who engineered the 2005 US Airways deal as chief executive of America West and attempted to buy Delta, said on Wednesday that consolidation is needed but unlikely as the industry mounts a recovery.
Tilton did not discuss any consolidation plans that United might have or make any forecast about who might attempt to merge next.
There has been some speculation that United and Continental Airlines (CAL.N) might be interested in a deal, or that United might look at an overseas partner. Delta and Northwest Airlines Corp. (NWACQ.PK) both plan to step out of Chapter 11 protection this year as stand alone companies.
The airline industry has shown signs of improvement in the last year due to capacity cuts that have allowed airlines to raise fares and cost cutting that has permitted them to keep more of what they charge.
And the industry continues to grow following several years of declines triggered by the September 11, 2001, hijack attacks. The FAA forecast on Thursday that commercial carriers are on track to carry 1 billion passengers a year by 2015.
Washington (Dulles), New York's John F. Kennedy airport, Los Angeles international and Atlanta Hartsfield are expected to see significant growth in the coming years, the Transportation Department projected. United has hubs in Los Angeles and at Dulles.
But Tilton said in his speech that domestic network airlines are financially stable, but not yet healthy after major restructuring since 2002. United completed a three-year bankruptcy a year ago.
"While most U.S. carriers are returning to some level of profitability, we are not yet earning our cost of capital and we are not in a position to make the level of investment undertaken by our international competitors," Tilton said.
He noted that United's Star alliance partner, Japan's All Nipon Airways Co. Ltd. (ANA) (9202.T), has ordered more next generation Boeing Co. (BA.N) 787 aircraft, 50, than all U.S. carriers combined.
UAL shares closed up $1.08, or 2.8 percent, at $38.90 on Nasdaq. Other major airlines also closed higher.
(Additional reporting by Kyle Peterson in Chicago)
03/15/07 18:15 ET
