CO & DL To Merge?

Mon Apr 09, 2001 10:57 pm

I was just reading Sunday's Star Ledger, the biggest paper here in Jersey, and in the front page of the business section was an article that was very interesting. In short, it said that if the UAL/USAirways deal is approved, Delta and Continental will merge. What do you all think about this?

RE: CO & DL To Merge?

Mon Apr 09, 2001 11:00 pm

All I have to say it get ready for a beating!
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RE: CO & DL To Merge?

Tue Apr 10, 2001 3:51 am

The Star-Ledger article is correct; DL and CO discussed the possibility of a merger in January. DL CEO Mullin testified in front of Congress in March that if UA-US goes through, DL would seek a merger partner, probably CO.

I've argued many times on this forum that UA-US should be canned, and with it any of the inevitable subsequent supermergers (probably DL-CO, AA-NW). Bigness is not bad of itself. If these mergers were to promise lower (not just "frozen") fares and better service, no one would object.

Trouble is, there's a historical record--been there, done that. The last time the major airlines consolidated, 1987-1989, the resulting Big 6 stopped competing and became a cozy cartel, with two effects: 1) to screw medium and small size commuities with less service and unjustly high fares, and 2) to screw everybody with bad service. Big Three means Bend Over.

So any DL-CO potential merger should be canned with the others. They portend serious antitrust and consumer problems. All megamerger proposals should be thrown into the Potomac, along with all the overpaid airline CEO's and greedy union bosses.

If the Big 6 airlines were clean up their act--lower their fares (which the profits of the late '90s demonstrate conclusively, is an economic possibility), improve customer service, and behave towards low-fare carriers--for a long time--opposition to consolidation would subside. And they could enjoy the economic benefits of consolidation (and would presumably pass those benefits along to consumers and employees, as well as management and shareholders).

Til then, they can take a hike.


Need a new airline paint scheme? Better call Saul! (Bass that is)
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RE: CO & DL To Merge?

Tue Apr 10, 2001 4:58 am

I've weighed in on this many times before, but I want to say that I agree wholeheartedly with Jim's comments - again. The merger can only mean bad news, for a number of reasons. And they're all in his post.

I think everyone loses sight of the antitrust considerations of the mergers by concentrating on the fact that, in and of itself, UA-US doesn't present a nationwide monopoly. The ensuing industry-wide consolidation, however, would.

It can go to hell for I'm concerned.
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RE: CO & DL To Merge?

Tue Apr 10, 2001 5:02 am

Berthune hassaid he wants nothing to do with the mergers.

He wants to keep running CO with the alliance with NW and NW wants to keep running with the alliance with CO. Both companies have said they can make much more money with a deep alliance because it saves all the hassles of merging such as fleet and personnel intergration.

Delta may wish to merge with CO, but it would likely be CO having to takeover DL because NW will block any deal that seeks to take CO. NW execs have said in a press conference that if CO baught DL that NW would continue the alliance with "a much larger CO"

My personal opionion is that NW and CO will remain independent and without DL in their pictures. I cannot however, rule out NW and AS or HP or maybe even CO and AS or HP.

CO/AS has good fleet commonality although again I don't think CO is interested/

NW/HP has good fleet commanilty and would give NW needed presence in the west but I don't think NW is too interested.

My personal favorite (even though the fleets don't match too well) would be a NW/AS merger so that Northwest Airlines would finally have a HUGE presence in the Northwest part of the country!
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Tue Apr 10, 2001 5:05 am

But why would AA merge with Northwest? They are getting Trans World. A merger with Northwest would be ridiculous.

You cite the profits of the late '90s. Well, while it is inarguably true that they made WAY too much money, let us not forget that NOBODY made money this past quarter. Or was it last year? Anyhow, only Southwest (who has made profit every day since they bought an aeroplane) and Continental actually TURNED A PROFIT. So, perhaps they should not lower fares, if they can't make money. US posted a loss in 2000 of $265 million roughly. Hmmm.

I am completely opposed to mergers in this industry as well. I am for RE regulation. But think- if UA/US goes through, then all other airlines will instantly become as influential as... say... Vanguard. No one else will matter. And we already know that US is going bust, and when/if they do, SOMEONE will get ALL of their routes, much as we divided up old Pan Am. I wonder who that would be... United? Sounds like...

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RE: CO & DL To Merge?

Tue Apr 10, 2001 6:19 am

I'm not convinced that US Airways actually lost $269 million last year. Wolf and the board pay the accountants, and they want to get his merger approved. The worse they can make US's condition look, the more credible his arguments about the merger being "essential" look.

US's traffic rose substantially in March, for instance, 15 percent which is *ahead* of a 12 percent increase in capacity. So the increase in March 2001 can't be credited to the fact that there was a strike threat in March 2000. And look at the route map. They're not adding flights on routes where all that nasty low-fare competition Wolf likes to whine about, is happening. Metrojet is conspicuously absent from new Southwest-cities Buffalo and Albany. In addition, all those A330s are carrying lots more high-margin pax across the Atlantic.

US Airways might be losing money, but it ain't anything like what Wolf wants us to believe. US has several good years in it left, and Wolf is deceiving the public about its condition. There's time to look for alternatives creating SuperUnited, Big Three, and even worse fare gouging and service for millions.

As to lowering fares, the economic slowdown is responsible for their recent losses. If you believe as I do that the slowdown is short-term, the airlines will not remain unprofitable more than a few quarters. They are essentially profitable, very profitable, and can lower the damn fares in medium-size and small cities.

Need a new airline paint scheme? Better call Saul! (Bass that is)
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RE: CO & DL To Merge?

Tue Apr 10, 2001 8:49 am

There's a lot of talk about how Delta needs to merge with somebody to remain competitive. I don't know if I really agree with that. Delta is still the largest domestic carrier in the U.S., by passenger trafffic. By the same figures, ATL is the largest airport in the U.S.. Delta was also ranked first in that airline service survey. Aside from labour issues that eventually hit all firms when profits rise and pay stays the same.

Delta is one of the best-managed airlines out there. I read an article that quoted Darryl Jenkins, one of the top analysts in the industry, as saying that despite the mergers of US/UAL and AMR/TWA, the only real future competitor for Delta in the domestic market is Southwest.

Internationally, Delta's SkyTeam is one of the alliances best-suited to handle the massive growth that is going to happen in the industry in the next couple of years. Both ATL and CDG is Paris are adding runways, and they're still adding partners. I know all the biggies are gone, but my guess is that there are going to be a number of airlines shifting around in the near future. I'd imagine with Roots Air and C3000 jockying for postition aa the second major carrier in Canada, they could use an alliance. It just goes to show that there is a great deal of room for growth.

In light of this, why merge with anyone, jsut for the sake of becoming bigger. The only reasons to merge are to a) gain more market share and b) lower overall costs. Aren't ATL and EWR a little too close to be sister hubs? What about Cleveland and Cincinnatti? If AMR's just getting that much bigger, why want a major hub in Houston?

Delta can avoid the massive debt load incurred by a merger, the instability associated with it - see Air Canada-Canadian - merging unions, HQ, etc. I know they've got similar fleets, etc, but I just can't see it working.

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RE: CO & DL To Merge?

Tue Apr 10, 2001 10:53 am

We've discussed this to death. A CO/DL merger won't happen.

RE: CO & DL To Merge?

Wed Apr 11, 2001 1:06 am

From a strategic viewpoint - to get around the NWA restrictive covenants - it would have to be CO that takes over DL.
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RE: CO & DL To Merge?

Wed Apr 11, 2001 2:32 am

CO can't afford Delta, Delta is worth an estimated $20 Billion Dollars!!!!! United doesn't have money like that, the US merger would cost them $11.6 Billion, a they would have to pay debts!!!!!!!
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RE: CO & DL To Merge?

Thu Apr 12, 2001 12:16 am

If anybody wants to read the actual article, here is a link:

The article is a real eye-opener, and blows away some misconceptions we've all had.

Nwa747-400: Bethune is the one doing the offer to Delta.

Cba: Read the article...

Ceilidh: You're absolutely right.

SESGDL: It would be a 'friendly' buy-out, probably some sort of stock-swap. If it happens, 'debt' wouldn't be an issue.
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RE: CO & DL To Merge?

Thu Apr 12, 2001 1:42 am

It was just a matter of time b4 this topic reappeared. Now pretty soon, DeltaSFO is going to post his two cents...which will probably involve him tetsufying that Continental is not good enough for the Deltoids!!!!!!!!

RE: CO & DL To Merge?

Thu Apr 12, 2001 4:42 am

I'm just waiting for Ceilidh to announce that he's in negotiation to purchase CO, DL, TWA and AA.  Smile
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RE: CO & DL To Merge?

Thu Apr 12, 2001 4:49 am

Username: Cdfmxtech
Posted 2001-04-11 18:42:56 and read 28 times.
It was just a matter of time b4 this topic reappeared. Now pretty soon, DeltaSFO is going to post his two cents...which will probably involve him tetsufying that Continental is not good enough for the Deltoids!!!!!!!!

Not that Continental isn't "good enough."

CO is an awesome carrier... I just doubt we're going to see either kind of deal. No matter who buys who.

UA/US is all but dead.

It's a new day. Every moment matters. Now, more than ever.
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Joined: Tue Dec 07, 1999 12:35 pm

RE: CO & DL To Merge?

Thu Apr 12, 2001 5:05 am

Well, if it CO/DL were to happen, I would be able to combine my SkyMiles and OnePass accounts!

Other than that I hope it doesn't happen.

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