Gnomon
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Mergers, Again For The 932nd Time

Sun Jun 11, 2000 3:26 am

FYI, and, yes, I know this is getting very, very old, but it was reported today on an ATL news station that Delta and American are now *officially* in early merger negotiations.

a.) Anyone have any definite info on this?
and
b.) Whatever happened to the Northwest idea? Did AA just drop that like a hot coal?
 
Guest

RE: Mergers, Again For The 932nd Time

Sun Jun 11, 2000 3:46 am

I have not heard anything about this, but it sounds like a bad combo. I don't know why, it just is. Its okay, thanks for posting this info, it is okay as long as itr isn't the same question over and over  . What were your specific source(s)?

Jack
 
Gnomon
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JWM Airtrans

Sun Jun 11, 2000 4:17 am

Yeah, thanks, the only reason I made that disclaimer at the beginning is that lots of people on here are sensitive about topics they think are redundant; I asked the question because AA/DL rumors on here haven't until now been supported by news reports.

I saw it personally on 11News, the ATL NBC affiliate, last night. I also heard it was in the Atlanta Journal-Constitution today, although I haven't seen it myself yet.

Re the merger specifically: I agree! The overlap of hubs in DFW, LAX, and JFK concerns me (despite the fact that LAX and JFK are minor hubs for both carriers), as does the potential monopoly of Latin American routes from the Southeast (ATL and MIA). I'd doubt that the DoJ would approve this.
 
Gnomon
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Here's The Article

Sun Jun 11, 2000 4:28 am

Here's the article in the Atlanta Journal-Constitution regarding AA/DL's exploratory talks.

The following is reprinted from the Thurs, June 8 edition of the ATL Journal-Constitution:

Delta, American in dating game
Scott Thurston - Staff
Thursday, June 8, 2000


Airline merger speculation is beginning to take on Shakespearean overtones: Who's wooing whom, and why?

Atlanta-based Delta Air Lines and American Airlines have opened exploratory discussions that include the idea of a marriage. But it's unclear whether the talks, which came to light Wednesday, are really aimed at a deal or intended more for dramatic effect.

The discussions follow a May 23 announcement by United Airlines that it will buy US Airways. That touched off a wave of speculation that the industry is on the brink of a major consolidation.

A combination of American and Delta, the No. 2 and No. 3 carriers behind United, would be a blockbuster. Yet the merger has been considered unlikely because of the airlines' size and their route overlap.

Both Delta and American have connecting hubs in Dallas and a major presence in the Northeast. Together they would control 35 percent of the U.S. market, swamping even the 27 percent share of a combined United-US Airways.

The talks between American and Delta --- and media leaks describing them --- could be a maneuver to torpedo the United-US Airways deal, which already faces tough antitrust scrutiny and opposition by consumer groups.

In essence, American-Delta talks tell U.S. Justice Department regulators that if they let the first deal fly, an even bigger pairing could follow.

"Such a transaction, and for that matter even the specter of it, would add fuel to the regulatory concern," said PaineWebber airline analyst Sam Buttrick, who at the same time termed a Delta-American merger "exceptionally unlikely."

He wryly suggested that the move could backfire on American and Delta because a merger between them "could have the unintended effect of making a United-US Airways deal look good by comparison."

Another motive for American might be to pressure Northwest Airlines, which it approached last week about a possible buyout. By talking to Delta, American would be signaling Northwest it isn't the only belle at the ball.

And there's a third, less complex possibility: If the United-US Airways deal is approved in some form, American and Delta would want to have the most powerful countermove ready; it makes sense for the two to at least talk.

American and Delta executives, plus their bankers and lawyers, met Monday in New York. American initiated the meeting, first reported in Wednesday's Wall Street Journal.

The discussion was broad and theoretical. No prospective pricetag or structure for a merger hit the table. It wasn't even clear which airline would be the surviving entity. American is larger in terms of annual revenue passenger miles but Delta's current market capitalization of $6.23 billion is about $2 billion higher than American's.

Delta's top executive at the meeting was Chief Financial Officer Ed West. Chairman and CEO Leo Mullin has been out of the country, on vacation and business, since just before the United-US Airways deal erupted.

Delta spokesman John Kennedy wouldn't confirm the talks. "This is media frenzy, not company frenzy," he said. "We're calm."

Delta, Atlanta's largest corporate employer, did issue an internal statement for use by managers in answering workers' questions. It concluded:

"The airline industry is very dynamic and is in a period of real change now, and it is not clear what --- if anything --- may happen in the future. However, it's important to remember that Delta management is carefully monitoring the industry competitive situation and that the company will take all appropriate actions to protect the interests of Delta and its people."

Airline analysts continue to believe the most realistic responses to the United-US Airways deal --- if it survives regulatory and labor hurdles --- are an American buyout of No. 4 Northwest and a Delta buyout of No. 5 Continental.

Complicating that scenario is the fact that Northwest owns a stake in Continental and could block any sale. But it would likely divest the stake as part of a merger with American, leaving Continental free to entertain a Delta offer.

That would condense the top six airlines into three of roughly equal market share. Advocates of that scenario say the airline industry is fragmented compared to other industries and a consolidation is overdue.

But such deals could take years to complete and will face many questions about the effect on service, fares and employees.

Several consumer groups already are aligning to oppose the United-US Airways deal, and Congress plans hearings on it.

''As a matter of public policy, we should say no mergers among the big six airlines for any reason, under any circumstance,'' said Ed Perkins, a passenger advocate and former editor of Consumer Reports Travel Letter.

United and US Airways crafted their deal to appease antitrust regulators, most notably with a pledge to spin off the combined carrier's operations at Washington's Reagan National Airport into a new minority-owned carrier called DC Air.

Yet many doubt that will suffice. The Justice Department, analysts note, already is trying to reverse Northwest's partial ownership of Continental, suggesting regulators would have to have a major change of heart to approve a merger between any two Big Six carriers.

On the other hand United can argue its buyout of US Airways differs from other prospective deals because it would salvage an ailing company of questionable long-term viability, while the other Big Six players are comparatively healthy.

Delta's interest in Continental was firmly established in 1998 when it tried unsuccessfully to buy the Houston-based carrier for about $3.1 billion. Delta and Continental have mostly complementary routes and are lightly unionized compared to other big airlines, making a merger easier in some respects.

Another Delta option would be a run at Northwest, or even United itself. But those deals would be more expensive and the carriers are heavily unionized.

 
Guest

RE: Mergers, Again For The 932nd Time

Sun Jun 11, 2000 4:31 am

Hmm... sounds interesting, but I doubt it qwill actually happen.
 
Guest

RE: Mergers, Again For The 932nd Time

Sun Jun 11, 2000 5:25 am

KLM British Airways Air France Lufthansa and Iberia shoudl all merge buy Airbuses and then out fly all the US airlines until they run Boring and the US out of business. Then they could fly in the US.
 
tritanic
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RE: Mergers, Again For The 932nd Time

Sun Jun 11, 2000 5:57 am

DL and AA has officially announced merger discussions, but will this actually happen? No, Not this decade!! Most anaylists have agreed this is more of a ploy than actual merger talk. They want to spin the heads of the justice dept. They don't want UA and US to merge!!! They are posing the question of "domestic consolidation" to the US government. DO YOU WANT TWO AIRLINES? It's a very smart way to have government interaction with the US and UA deal.

By the way while on the topic. Bud Shuster (House Transportation Comittie Chairman R-PA) said this about the UA-US merger, "looks to me like a good deal"! Now remember this is the ASS that's been complaining about the airline industry from A-Z. He's been threatening Congressional Action for the past year and a half. He's been adamant about "competition" within the airline industry, and want's more low fare Airline service in more cities. The last bill he opened up slots at cities like DCA just for low fare carriers. This guys has real balls to say, "speaking as chairman, and a PA lawmaker concerned with preserving US airways hubs at Philidelphia and Pittsburg. Despite the merger COMPETITION COULD STILL BE STRENGTHENED"

I am not amazed how Bud Shuster is so concerned about the poor service amongst carriers, and the lack of competition, EXCEPT WHEN IT'S IN HIS BACK YARD!!!
 
Guest

RE: Mergers, Again For The 932nd Time

Sun Jun 11, 2000 6:53 am

>>>I am not amazed how Bud Shuster is so concerned about the poor service amongst carriers, and the lack of competition, EXCEPT WHEN IT'S IN HIS BACK YARD!!!<<<

Let me introduce you to a good friend of mine.

Tritanic, meet '$$$$$$$$$$$$$$$$$$$$$$$$$'
 
Guest

RE: Mergers, Again For The 932nd Time

Sun Jun 11, 2000 6:54 am

AMEN tritanic AMEN
 
HARTSFIELD
Posts: 175
Joined: Tue Jul 04, 2000 10:17 am

RE: Mergers, Again For The 932nd Time

Mon Jun 12, 2000 3:58 am

Elite Flyer........You are so immature
 
HARTSFIELD
Posts: 175
Joined: Tue Jul 04, 2000 10:17 am

RE: Mergers, Again For The 932nd Time

Mon Jun 12, 2000 4:08 am

Get this one, Some crazy guy I know said

"if anyone was to buy someone it would be Continental buy Delta there worth more"

Please comment all you want on this.
 
HARTSFIELD
Posts: 175
Joined: Tue Jul 04, 2000 10:17 am

RE: Mergers, Again For The 932nd Time

Mon Jun 12, 2000 4:16 am

Here he goes again:


"Delta doesnt have enough money to buy Continental"




 
tritanic
Posts: 149
Joined: Fri Jul 23, 2010 8:12 pm

RE: Mergers, Again For The 932nd Time

Mon Jun 12, 2000 5:01 am

Delta has more liquid cash than any other airline in the WORLD,,,,Once again incase that did not make sense, Delta has more liquid cash than any other airline in the world......Delta purchased ASA, and Comair, and still has billions in the bank!!!!!!! Do you know how much money Delta got from Priceline.com? When all done and finished Delta will stand to retrieve over 14 billion dollars!!!!!! Delta took millions of stock options just to let Priceline sell Delta tickets, so when delta had millions in stock and Priceline went public, well let's just say that was one of the best financial moves in the airline industry for 1999!!!!!! Remember it was just a few years ago CO was begging for money from DL and then NW!!!!
 
LAXFlyer
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RE: Tritanic

Mon Jun 12, 2000 5:14 am

I think you need to get your facts straight here Tritanic. CO never went begging to either DL or NW for cash.
 
tritanic
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Joined: Fri Jul 23, 2010 8:12 pm

RE: Tritanic

Mon Jun 12, 2000 5:34 am

The whole deal between CO and DL, and CO and NW was a cash deal exchaning hands from NW and DL, they were looking for cash and there is no way to sugar coat that!!!!! The deal fell through with DL because CO wanted all the cash, but refused DL to make any management decisions, and that is true.
 
LAXFlyer
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RE: Tritanic

Mon Jun 12, 2000 5:44 am

Check again. The deal between CO, DL, and NW was the sale of stock by an invester named David Bonderman. As I said earlier, you need to get your facts straight before posting something so ridiculous.
 
Gnomon
Topic Author
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Joined: Thu Jun 03, 1999 12:38 pm

LAXFlyer

Mon Jun 12, 2000 6:35 am

LAXflyer is right. NW acquired the stake in CO from a third party - the investor whom LAXFlyer named. Airlines do not sell enormous equity stakes of themselves with attached voting rights to other airlines/competitors simply to raise cash. That would be suicide because of the proximate merger possibility. To raise cash, airlines divest themselves of some of the stock held internally, and that's rare. NW, in and of itself, purchased the stock pursuant to the codeshare agreement with CO, and CO has been the unhappy wife for 1.5 years now.

Also, how much cash does Delta have on-hand? I could have sworn that AA now has more liquid cash than the other carriers. Keep in mind that DL's purchase of ASA was extremely expensive and wasn't as simple as a stock buyout. ASA is an expensive operation and the airline has incurred a lot of debt in recent years due to fleet leases, expensive maintenance, the 146s' expensive legacy, and the fact that people in the Southeast HATE ASA because they're NEVER on time. Not EVER.