AMR Corp.'s American Airlines and Delta Air Lines Inc., the world's second- and third- largest carriers, held talks on industry consolidation and discussed merging, a person familiar with the talks said.
Monday's talks involved senior managers below the chief executive level from both carriers, as well as investment bankers and attorneys, the person said. Spokesmen for the companies declined to confirm the wide-ranging discussion, which was first reported in today's Wall Street Journal.
The meeting comes two weeks after UAL Corp., parent of No. 1 carrier United Airlines, agreed to buy US Airways Group for $11.6 billion. AMR has separately approached Northwest Airlines Corp. about a purchase. The flurry increases pressure on Justice Department regulators reviewing the UAL-US Airways plan, and any merger must overcome big hurdles, analysts said.
``Washington will be faced with the choice to either approve all mergers or reject all mergers,'' said Julius Maldutis, a CIBC Oppenheimer analyst. ``My view is, the AMR-Northwest or AMR-Delta proposed combinations are designed to achieve the second objective from Washington.''
The proposed acquisition of No. 6 U.S. carrier US Airways by UAL's United Airlines, the world's largest, would be the nation's biggest airline purchase. Analysts said at the time that American and Delta would have little choice but to begin reviewing possible acquisitions.
American spokesman John Hotard and Delta spokeswoman Cindy Kurczewski declined to say whether the companies held talks.
``We're always talking to a lot of people about a lot of things,'' Hotard said.
AMR shares rose 1/8 to 28 7/16 in midafternoon trading, while Delta rose 59/64 to 51 13/16. Northwest shares fell 9/16 to 31 7/16.
American and Delta
Financial terms of a possible American-Delta combination haven't been discussed and it wasn't clear which company would be the acquirer, the Journal reported. While American is the larger airline among the two, Delta's market capitalization of about $6.2 billion is larger than AMR's of about $4.2 billion.
A combination most likely would involve an exchange of stock with no takeover premium, PaineWebber analyst Samuel Buttrick wrote in a report.
The two companies have significant overlap on their routes, something likely to pose problems for regulators if the companies did agree to a transaction. Delta is the second-largest carrier at American's largest hub of Dallas-Fort Worth International Airport, for example.
The talks with Delta talks could also give American some negotiating leverage if it were to pursue Northwest instead. People familiar with that situation said AMR approached Northwest last week in early talks toward a possible purchase, though no offer was made.
Northwest's routes in the northern U.S. and Asia would fit well with American's network that's focused in the southwestern and eastern U.S. and Latin America. Still, there would be some overlap in the upper Midwest U.S.
Some analysts have speculated Delta would try to purchase Continental Airlines Inc., the fifth-largest U.S. carrier, in response to a UAL-US Airways combination. Northwest owns 14 percent of Houston-based Continental, a stake that likely would have to be sold if Northwest is acquired by another carrier.