Aircanada014 From Canada, joined Oct 2005, 1513 posts, RR: 0 Posted (7 years 11 months 4 weeks 5 hours ago) and read 10736 times:
I was just wondering after thinking about CO backed out the merger proposal from UA because of the financial and struggling from UA , do you think DL/NW made the right choice or wrong choice? We all know both DL and NW are struggling, their financial is somewhat and they are taking risks however its not official approval of both merging. They did made some profits in the past. DL is taking a risk merging with NW. What are your thoughts? CO definately want to form an alliance than merging cause they don't want to take the whole load of debt and other issues like AC and CP did.
It would be nice to see CO with Star Alliance.
Justloveplanes From United States of America, joined Jul 2004, 1228 posts, RR: 1
Reply 1, posted (7 years 11 months 4 weeks 3 hours ago) and read 10646 times:
If there is a major merger to work, it would be DL/NW. CO/NW would have been another one. Highly complimentary route structures. CO is well structured now and DL and NW did very well getting their house in order post BK. DL and NW now have amazing global coverage.
CO and UA would have had more coverage possibly, but UA didn't fix itself in BK as much as DL and NW. So I think CO made the right decision not to merge their very refined op with a bigger entity that still apparently is unstable in a major way. I think it is too early to call DL and NW, but all signs look to me like it was the right thing to do. I don't believe the risk together is really any greater to what they are facing alone. They don't have to rush rebranding or merging maintenance or restructuring or other items that require sunk capital and they can start to benefit immediately from global route synergy to get more international revenue.
RFields5421 From United States of America, joined Jul 2007, 7866 posts, RR: 32
Reply 2, posted (7 years 11 months 4 weeks 2 hours ago) and read 10571 times:
Mergers work by either (1) reducing costs by eliminating duplication; or (2) increasing revenue by raising prices or adding products. Often both.
The NW/DL merger will have to reduce a large part of their combined aircraft, pilots, FA's, ground crew, maintenance and support staff's to make money. The US/AW merger has failed to deliver on this promise to investors. I've seen no plans which indicate how much DL will cut the NW staffing and aircraft. Who knows how it will work out.
I don't see any additions to the NW/DL route structure, no increases in available seats, etc in the planning, so raising prices appears to be the way this merger is planned to succeed.
Yes the new Delta will have routes to the Pacific which Delta never had, but they will be the existing, or more likely a reduced version of the existing, NW routes.
Mergers need a lot of complicated things to work right to be successful, including fully integrating the operation of the two companies if they have a very similar core business.
US/AW hasn't done that - it still operates today as two separate airlines, with all the high costs of duplication.
I think CO looked at those negatives, and could not see enough positives to a merger. None of the potential candidates for a merger will ADD enough to over come the negatives.
Unions are going to be a huge issue because the only way the new company will be profitable is by firing thousands of people. Of course the union, and non-union, workers are going to be unhappy. And rightfully fearful about their jobs, losing their homes, not being able to pay for their children's college, or their retirement.
My personal opinion is CO was very smart. They recognize that the fundamentals of the airline industry in the US, the world, have to change soon. They have the very easy to observe failed to fulfill promises merger of US/AW as an example of how it will work in the current regulatory environment.
Airline travel will no longer be affordable for business travelers for quick last minute trips/ meetings. The leisure travel industry is going to cut significantly as the true costs of travel come into ticket prices.
It's a dire forecast, but if fuel prices stabilize at current levels, the total number of people carried on aircraft will probably be reduced by 20-25% over the next five years. The only way to maintain current levels is a reduction in fuel costs by at least 50%. I seriously doubt that will happen.
Being tied into a merger with an company struggling already is not a good way to face a dark future.
Uadc8contrail From United States of America, joined Sep 2003, 1782 posts, RR: 8
Reply 4, posted (7 years 11 months 4 weeks 1 hour ago) and read 10392 times:
I'm wondering if CO is making the right decision by teaming up wth AA/BA? if they do not get what they want in that alliance does anyone here think they can make it if they go out on their own? i can not see AA giving up to much to CO as they overlap quite alot here and AA/BA is no different than DL/NW when it comes to alliances and some in here have said that CO always took the back seat when it came to skyteam whether CO wanted it that way or not.
Max999 From United States of America, joined Dec 2005, 1133 posts, RR: 0
Reply 5, posted (7 years 11 months 4 weeks 1 hour ago) and read 10342 times:
I believe the only thing of value that CO wanted from a UA merger was its Pacific division. If CO could pick up the division in a fire sale, it would do that...exactly like what UA did when Pan Am started declining in the 80's. Otherwise, the rest of UA does not offer much to CO.
In the end, CO made the right decision not to merge with UA.
All the things I really like to do are either immoral, illegal, or fattening.
Airborne1 From United States of America, joined Feb 2008, 99 posts, RR: 0
Reply 6, posted (7 years 11 months 4 weeks 1 hour ago) and read 10306 times:
heard some pilots talking the other day that CO and UAL were secretly doing another deal.. It's not over until the fat lady sings.. All you people wish United to die should get a life. Worry if you are going to have a job in a year from now.
Quote: Kellner Thwarts the Voracious Deal Machine
Continental CEO Bucks Powerful Forces
In an 11th-Hour Rejection of UAL Merger
May 6, 2008; Page C1
The Deal Machine is voracious. The Deal Machine is smart. You cannot shake the Deal Machine -- unless you're Larry Kellner, the bald-headed, bulldog chief executive of Continental Airlines.
Mr. Kellner stepped inside the Deal Machine months ago, and was just hours from announcing an industry-upending merger with United Airlines parent UAL. The Deal Machine prodded and pushed, but quite incredibly, Mr. Kellner said no.
Perhaps you've not met the Deal Machine yet. It is elaborate, stubborn and well-paid. It consists of bankers, lawyers, investors, analysts and the media. Each has a peculiar self-interest in seeing a deal come together.
Continental Airlines' Larry Kellner, the man who fought off the deal-making machine.
Last week was a rare rebuke to the Deal Machine. Microsoft's Steve Ballmer rebuffed the inevitable advice to up his bid for Yahoo.
Most of the time, the overall effect is inevitability. The deal will get done -- has to get done -- to appease outsiders and even one's own employees. Veteran deal-maker Bruce Wasserstein used to urge reluctant CEOs to "dare to be great." In this transaction, the Deal Machine hectored Continental that United was a once-in-a-lifetime buy.
"One reason that deals develop a life of their own is that they can make a lot of economic differences in people's lives," said Chuck Yamarone, a longtime Continental director. "That creates incentives."
How hard is it to resist the Deal Machine? Hard enough that there's even a seemingly medical term for its effects. Boards and CEOs often privately cite "deal fatigue" when they yield to a transaction.
"We always feel the undertow of it," says Mr. Kellner, in his first interview since announcing Continental would remain independent on April 27. "There's this huge momentum. You've got people working until 2 a.m. and coming back to the office at 8 a.m. But you've got to get confidence to come back and look at the facts."
The facts are horrific if you run an airline. Oil has climbed to about $120 a barrel. The struggling U.S. economy is crimping both leisure and business travel. The effects on United have been especially severe. In the days before the expected merger, United said it would post a massive loss. It gave little assurance on how it would cope with $2 billion in new fuel costs.
All that weakness was a plus for Mr. Kellner's negotiating. It meant that Continental, the nation's fourth largest airline, would prevail over United, the country's second largest. Mr. Kellner would be the unchallenged boss. The two sides had even agreed on price. "It was baked," said one person involved in the talks.
But Mr. Kellner and his close colleague, President Jeff Smisek, weren't so convinced, say people involved in the talks. For months they had studied the puzzle: integrating two different airplane fleets; spending new capital to pare back hubs and workers; measuring how fast new revenue would flow into the company. The risks were getting higher. The rewards were getting lower.
"It gets very detailed," says Mr. Kellner. "At the end of the day you're dealing with huge numbers. If you're off 1%, that's $150 million a year. And if you took Continental and doubled it, being off by 1% would be a $300 million swing."
Mr. Kellner's surprise rejection didn't go over well. United Chief Executive Glenn Tilton seemed shaken by the move. Others involved in the process described a deep emotional letdown. Months of work was cast aside -- not to mention millions in fees paid to advisers.
History will reveal whether Mr. Kellner made a shortsighted decision. For now it stands as a rare, welcome moment when man prevailed over machine.
COalways From United States of America, joined Feb 2008, 389 posts, RR: 0
Reply 13, posted (7 years 11 months 3 weeks 6 days 20 hours ago) and read 9778 times:
I think Continental made the BEST move by staying independent they have so much growth ahead of them with over 110 Narrowbody and Widebody A/C, they already have an instensive route struture across the Atantic, Latin America and a pretty good route struture in Micronease. They have the best Employees out of any US carrier and no US competitor can beat them for there inflight Services.
So i see CO haveing a very bright future ahead of them and let the rest who merge fall apart in there services and employee relations. Some of there mergers in my eyes are quick fixes, NW/DL lost a total of 10billion so seems like they just going to have a bigger debt and losses ahead of them.
MasseyBrown From United States of America, joined Dec 2002, 6130 posts, RR: 7
Reply 15, posted (7 years 11 months 3 weeks 6 days 20 hours ago) and read 9734 times:
DL may choke on a few bones digesting NW, but their chance of survival is probably around 90%. With AF cut out of the current version of the deal, their chance of surviving long-term on their own improved also.
I think DL senior management saw it as the only chance of their careers to get big in Asian in a hurry, which no doubt overrode some of any management's usual caution. It would take DL a decade or more to try to duplicate what they gain from NW. As well, an all-stock transaction is the cheapest way to do it; and DL might not get that chance again, either.
So I'd say DL and CO have both made reasonable choices; whether they made the best choices remains to be seen.
The best time to plant a tree is today. The second best time is tomorrow.
DeltaL1011man From United States of America, joined Sep 2005, 10858 posts, RR: 16
Reply 16, posted (7 years 11 months 3 weeks 6 days 18 hours ago) and read 9123 times:
Quoting Aircanada014 (Thread starter): I was just wondering after thinking about CO backed out the merger proposal from UA because of the financial and struggling from UA , do you think DL/NW made the right choice or wrong choice? We all know both DL and NW are struggling, their financial is somewhat and they are taking risks however its not official approval of both merging. They did made some profits in the past. DL is taking a risk merging with NW. What are your thoughts? CO definately want to form an alliance than merging cause they don't want to take the whole load of debt and other issues like AC and CP did.
How is DL or NW in trouble? UA lost 500 mill (in cash) and DL/NW lost around 200 mill(again in cash)? now do you see why CO/UA didn't happen?
The primary benefit for this merger is that DL will in fact open dozens of new routes to Asia in the next year, many of which could never happen if the merger doesn’t take place. DL through NW will have a very strong position in Asia and access to the 787 which will be very good for opening new routes and competing effectively against established Asian carriers. DL has the benefit of a huge domestic network (DL and NW will have the largest domestic network among network carriers and only slightly smaller than Southwest). There are new routes from all of DL/NW’s int’l gateways to Asia that will be possible because of the size of the new DL, the relative undeveloped nature of NW’s Pacific network outside Japan, and the availability of high performance competitive aircraft like the 787 and 777LR. The DL/NW merger is all about creating new revenues which could not be obtained if the two airlines remained independent; many of the opportunities will happen by opening new routes on the Pacific and pushing more traffic onto NW’s existing Japan flights but others will happen simply by reallocating aircraft between DL and NW hubs.
CO could have done the same thing with UA but they clearly saw the risk was way too high given UA’s financial condition. CO will continue to grow but it may have permanently relegated itself to being a much smaller carrier than any of its US network counterparts. It is possible to be small and profitable, however, CO will not be able to compete for business on a global scale the way DL/NW and UA plus whoever will do.
Gsosbee From United States of America, joined Jan 2005, 825 posts, RR: 0
Reply 18, posted (7 years 11 months 3 weeks 6 days 17 hours ago) and read 8957 times:
I believe it was UA's financial condition that scared CO. Any merger is a 50/50 proposition because of all of the issues the company really has no control over. In the short term CO will probably outperform DL/NW because they are doing a better job now. However after a couple of years the new DL will catch up (after several rounds of rationalization and new international start-up costs) because they will have a greater mass. After Open Sky's 2, CO will be swallowed by an European airline as their lack of mass will spell doom. Will DL merge with AF/KLM at that time? Probably 50/50. Depends a lot on labor and fuel.
In any industry if you are not in the top 2, you lose market clout the further you go down. You have to be in a position of being able to control (rather than follow) the market. Yes there will be niche players, but generally they are not long term players.
STT757 From United States of America, joined Mar 2000, 17564 posts, RR: 50
Reply 19, posted (7 years 11 months 3 weeks 6 days 17 hours ago) and read 8930 times:
It's more like a $495 Million loss for the first quarter when you combine DL and NWA's reports.
Quote: April 23, 2008 8:38 AM EDT
EAGAN, Minn.--(BUSINESS WIRE)--
Northwest Airlines Corporation (NYSE: NWA) today reported a first quarter 2008 net loss of $4.1 billion, or $15.78 per share. Reported results include a non-cash goodwill impairment charge of $3.9 billion. This compares to the first quarter 2007 when Northwest reported a net loss of $292 million.
Excluding non-recurring, non-cash impairment charges and losses associated with marking-to-market out-of-period fuel hedges, Northwest reported a first quarter 2008 net loss of $191 million versus the first quarter 2007 when the airline reported net income of $73 million before the impact of reorganization items and out-of-period fuel hedge gains.
Quote: Delta reported a net loss of $274 million in the first quarter of 2008 compared to a net loss of $6 million in the first quarter of 2007, excluding special and reorganization(4) items. The $268 million year over year increase in net loss was driven by a $585 million increase in costs due to higher fuel price. Delta did not record an income tax benefit in the March 2008 quarter.
That combined DL/NWA loss for the First quarter is not that far off of UAL's $500+ million dollar loss, and all three are lost much more than COs $80 Million.
PHXtoDCAtoMSP From United States of America, joined Feb 2008, 299 posts, RR: 0
Reply 20, posted (7 years 11 months 3 weeks 6 days 17 hours ago) and read 8869 times:
Quoting RFields5421 (Reply 2): US/AW hasn't done that - it still operates today as two separate airlines, with all the high costs of duplication.
This is slightly off topic addressing this....but there are no high costs of duplication. The only thing separate about the two airlines are the contracts of flight attendants and pilots. During the last conference calls, several analysts asked what benefits were being missed by having two contracts and two separate work groups. The response was "practically nothing". There is almost negligent additional cost with how US/HP is being run right now. This may have to do with the fact that there will be increased costs for a new contract...but either way...US/HP is reaping/has reaped all of the benefits that the merger will produce and the separate FA and pilot contracts haven't hurt anything.
I have to disagree. The best merger opportunity of all the carriers would be AA/CO. Although it would never go through, everything about that merger would destroy all the competition.
I think CO is a special exception in that they are specialized when compared to the rest. They realized this and pulled from the negotiations. Yes I am biased towards CO, but for good reason. I know a good product when I see it. When the winds dies down in the market, (which is sooner than later) they will have been better off for it.
Panamair From United States of America, joined Oct 2001, 5271 posts, RR: 24
Reply 22, posted (7 years 11 months 3 weeks 6 days 17 hours ago) and read 8615 times:
Quoting STT757 (Reply 19): That combined DL/NWA loss for the First quarter is not that far off of UAL's $500+ million dollar loss, and all three are lost much more than COs $80 Million.
Hmm and yet, CO managed to generate positive cash flow of only $69 million from operating activities compared to $362 million at NW, $283 million at DL , and $449 million at AA during the same quarter. UA generated negative cash flow of $80 million while US's was negative $25million.
LHR777 From , joined Dec 1969, posts, RR:
Reply 23, posted (7 years 11 months 3 weeks 6 days 16 hours ago) and read 8487 times:
Quoting Airborne1 (Reply 6): heard some pilots talking the other day that CO and UAL were secretly doing another deal.. It's not over until the fat lady sings.. All you people wish United to die should get a life. Worry if you are going to have a job in a year from now.
Pilots know no more about 'secret deals' than any other employee work-groups. They like to think they do, but they don't.