DeltaSFO
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DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:03 am

Hey folks.... looks like the Delta/Continental merger is about to be consumated. Another airliners.net user informed me yesterday, and I heard similar news from other individuals last night, that Delta Air Lines and Continental Airlines reached agreeement on the terms of a merger yesterday morning in Atlanta. Look for an announcement as early as Tuesday morning. Delta is the acquiring entity in this case.

No word yet on the details, but one would imagine that the new company would be named Delta Air Lines. My guess is Leo takes Chairman and Gordon takes CEO. The new Delta would be the world's largest single airline, and the DAL airline family, consisting of Delta/Continental, CoEx, Comair, and ASA, would be the world's largest airline group.

Two days ago, Leo Mullin was asked to comment on the possibility of a Delta/Continental merger and his words were: "It's a strategic issue that has been opened up as a result of this (the September 11 disaster)." So he essentially confirmed what people had suspected. Then yesterday, the news appeared to start leaking throughout Wall Street, as Continental stock spiked, closing the day up 15.38%.

It would seem that there is no better time than now for mergers, as Congress, wary of further subsidizing our nation's air carriers, would be apt to go along with this on the premise that the new, larger airline is capable of surviving without further handouts. In addition, the entire premise allowing this merger to take place is the fact that while Northwest has right of first refusal on an acquisition of Continental, Northwest is not in any financial condition to match Delta's offer right now. Leo knows that the best time to make strategic moves is now, and it looks like he's doing it.

Looking at the new entity, the new Delta Air Lines solidifies its position as the leading U.S. carrier across the Atlantic.... easily surpassing rivals American and United. Delta inherits Continental's strong #2 position in the U.S.-Latin America market, gaining Continental's very profitable IAH-Mexico services along with the rest of CO's extensive LatAm network.

Also, Delta joins into an extensive domestic alliance with Northwest, more out of being legally bound to do so by CO's contract with NW than out of desire to do so.

I still haven't made up my mind whether or not this is a good thing. Both airlines could probably survive as separate entities, and while Delta picks up a lot of profitable routes, remember that the bigger they are, the harder they fall... Pan Am was once huge, as was TWA, as was United, which appears to be fighting for its very survival.

All we can do now is wait and see what happens... Don't forget that Delta and Continental have reached agreeement on a merger before, only to stay separate.
It's a new day. Every moment matters. Now, more than ever.
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:10 am

Lets hope not.
"There is no victory at bargain basement prices."
 
dutchjet
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:11 am

I know that DL and CO have flirted with eachother before, and maybe it is a good match but maybe not. The difficult issues are: NYC (hubs/transatlantic gateways at both JFK and EWR), hubs in both DFW and IAH, and hubs in both CVG and CLE. Isnt there much overlap?

Dont want to sound rude, but has this been reported in any official publication or release?
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:14 am

I just searched all the normal news outlets and couldn't find anything about it. One would think that Delta would want someone like Alaska or America West.
"There is no victory at bargain basement prices."
 
PanAm747
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:17 am

But what would their livery look like?

But seriously I always thought this would be a great idea. Both airlines have similar fleets, engine types etc, that would make the process go a little bit smoother. But this new airline will still lack Pacific routes.
Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
 
deltaownsall
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:42 am

I think that this would be awesome...but what do you think the DOJ would have to say about it?
 
cba
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:44 am

I seriously doubt it. Just another rumor folks.
 
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lindy field
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:55 am

While just a rumor, this proposed merger would be quite timely in some ways. The combined entity would be able to divest itself of many redundant routes and aircraft by claiming (rightfully, in many cases) economic conditions made those routes and assets unviable. Continental's management did pipe up immediately after the WTC attack claiming that they'd be bankrupt within a month. Presumeably CO is still hemhoraging money. This will make the DOJ all the more likely to approve a merger. Can Delta afford such a merger? Good question. Would the other airlines be able to mount opposition to block such a merger? Also a good question. I think this rumor bears monitoring. Pass on any other info, Delta SFO, and thanks for bringing up the possibility in the forum.
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:56 am

It takes more than a day or two to prepare a merger of two large airlines. Normally it is the company being taken over that suffers most of the job cuts but I don't think Gordon would allow that.
"There is no victory at bargain basement prices."
 
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flashmeister
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:01 am

I also have heard this in the past couple of days from some buddies in Atlanta. They were saying that Tuesday 'would be an interesting day' for those in or watching the industry.

While a lot can happen between today and Tuesday, I wouldn't discount this yet.

There may be some integration problems back east, but CLE could be co-located with CVG with little problem. New York is a different matter entirely, however. I don't know how that would be worked out.

Delta would drop Dallas like a hot potato, and rightly so. They've always played second fiddle to AA there.

Where this really shines, though, is out west. DL gets a huge hub at IAH, and it makes SLC even more important as it becomes possible to have a national network once we get through this downturn.

This is a 'good thing'. Yes, we get a new #1, but in this day and age, the only way to save both is to combine.
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:02 am

I still don't like it. IMHO
"There is no victory at bargain basement prices."
 
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flashmeister
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:03 am

B757300, it takes more than a day or two to integrate any two companies, but the agreement to merge, especially in today's environment, can be much shorter.

This is an intent - it's not a closing. This is where the due diligence begins... the examinations of assets, financials, etc.

The merger would not be consummated Tuesday, simply announced.
 
dutchjet
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:05 am

If this was to happen, there would be only one airline operating the 767-400!?

Another thought, if this is announced, do you think that UA and US will get back together? Will NW be the odd man out at the party?
 
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lindy field
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:10 am

This plan, if true, is probably the product of more than two days. I would imagine that Delta's management began talking to Continental's management within a week of the WTC attack.

Yes, 764s operated by one airline until other airlines get around to ordering examples for themselves!
 
Cody
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:10 am

I am looking at this from a simple point of few. Like the original post said, the larger they are, that harder they fall. An airline can only get so big and then they become inefficient. Look at United, American and even Delta to an extent. I wish these companies would learn that and I thought Continental had. Many people believe shear mass is important and in some ways it is.....but then again if it were, why is WN as well off as it is? Once you fly everywhere from everywhere and become big, bigger and biggest there is simply no way to grow efficiently. The story ends until someone comes along and says, "the only way to go is downsize since we simply cannot operate in this inefficient fashion with nine hubs and five million different aircraft types" and believe me it will happen if this merger rumor is true. History does and always will repeat itself.
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:11 am

Someone is going to go after USAirways and probably Alaska and America West. Southwest is probably just waiting for someone to file bankruptcy so they can take the assests they find valuable.
"There is no victory at bargain basement prices."
 
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lindy field
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:16 am

Cody--You're quite right. I'm sure that if Delta and Continental merge, the combined company would downsize considerably, eliminating the Cleveland and Dallas hubs at least, ditching the DC-10s, MD-11s, 727s, 732s, and MD-90s immediately. Some of the planes are already on their way out, but I suspect that process would be expanded to include more types. The end result probably wouldn't be that much larger than the combined AA/TWA.
 
nwa747-400
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:16 am

If Co and DL do this (which I dont think they will) look for NW to pick up either Alaska or America West. I dont think anyone wants to touch US with a 10 foot poll right now. NW wont be left out in the cold. I would love to see NW and Alaska team up and make NW a big carrier in "the Northwest"!
 
deltaownsall
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:19 am

I highly doubt UA going after US again...they are in great financial trouble at the moment. Also, I agree, the bigger they are, the harder they fall. But...DL and CO have two of the best CEOs in the business IMHO...and it will be interesting to see if this goes through...and how the new Delta fares.
DeltaOwnsAll
 
dutchjet
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:24 am

Every airline, including US Airways, is in deep financial trouble at the moment, so I guess absolutely anything is possible. I think we will have a major problem is the events of 9/11 result in the US having 3 or 4 mega-mega carriers. I agree with the statement above, bigger is not always better, and at a certain point the carriers simply are too big and ineffecient (especially when created by mergers...)

I do not think any of the large carriers will invest in one of the smaller guys, however, the benefits are not great enough.

 
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flashmeister
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:27 am

As I argued back when US+UA was considered, consolidation simply presents the smaller airlines with opportunities for growth -- especially now. DL+CO would be big, but not nearly as big as they would have been before 9/11.

For the small carriers that do survive this (Frontier, AirTran, Alaska unless they're bought), they will have a great opportunity when the traffic returns, and it will.
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:41 am

The only good thing about this is maybe Delta would get rid of that hideous color scheme. Personally, keeping the Continental name might not be a bad idea.
"There is no victory at bargain basement prices."
 
deltaownsall
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:05 am

Hey- the Deltaflot Scheme is the best ever! Thank God they are keeping it...the CO scheme is so plain  Big thumbs up Although, with the current rate of painting of the DL aircraft...IF this merger does go through...the CO livery might not disappear for a loooooong time still. The name Delta is also better IMHO...dont ask me why...b/c I really dont know...just with their heritage and everything.
DeltaOwnsAll
 
co/ba
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:07 am

I think it is just a rumor. Even if they did talk I don't think anything will come of it. CO wants to remain CO which is why they went with NW before and not DL. Though the situation is verry different now CO is in a better situation when passengers return by staying smaller than by becoming a mega carrier. CO has also put an emphasis on bigger isn't better better is better. I don't think it fits in with the go forward plan.
 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:08 am

Of course, this is awful news for all NON-UNION Delta employees who will be laid-off in preference for their cheaper colleagues from Continental who have contractually guaranteed positions in a new company.
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:10 am

I talked to a guy the other day who works @ my local airport for COEX. He said even though passenger numbers are down, they have been picking back up and are not too bad considering what happened. Give it time and the passengers will fly again.
"There is no victory at bargain basement prices."
 
micstatic
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:13 am

How could this possibly be? Correct me if I'm wrong, but I was under the impression that NWA had the voting power to directly stop any merger of COA.
S340,DH8,AT7,CR2/7,E135/45/170/190,319,320,717,732,733,734,735,737,738,744,752,762,763,764,772,M80,M90
 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:16 am

NWA has rights of first refusal to purchase CO in the event of an offer from a third party. However, NWA does not have enough cash on hand to complete a purchase of Continental at present. Hence, this is the best time to try and push this deal through for Delta.
 
b757300
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:18 am

I think Continental purchased its stock back from NWA. This would give Continental the right to decide its own fate.
"There is no victory at bargain basement prices."
 
artsyman
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:27 am

CAL cannot merge with Delta without either the permision of NWA or the deal being Cal taking over Delta. So I can say that you wont see this merger happen where it becomes Delta airlines,...but that aside... it's all a crock anyways....

you heard it hear

Jer
 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 4:33 am

Finally, Now we can get Leo Mullin out of the CEO seat.

Maybe this will end the FIST FIGHTS with ASA.

 
deltaflyertoo
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 5:15 am

Wow! This news is big. Thanks for sharing what you know DeltaSFO.

This is going to be a huge gamble for both DL and CO. From a business point of view, they have always been the perfect airlines for marriage. Delta has had that weak position at DFW forever and could use IAH. Same story in NY. While an impressive operation at JFK, CO has it better at EWR. CLE will probably just go away.

The timing however is iffy. While I agree with everyone above about why the timing is good, keep in mind both airlines are loosing money. Is DL going to take on all CO debt by 2002 and hold them as a subsidary for the next year? If so, this could have major financial implications for DL. Or will DL operate CO seperatly and wait until times are better to merge. Should be interesting.

IMO, I don't think NW will by Alaska as someone suggested. The reality is, Alaska really isn't that attractive of a target. It's routes pretty much vacum everyone to the Pacific Northwest-who cares? It doesn't compliment the route system well.

As for HP getting bought now, I say no way. Who in their right mind would move in on them in these tough times just to have WN looking at them in they eye.
 
RJ_Delta
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 5:19 am

Hi:

Are anothers false rumours or this time is true. If this it's true that will be great always that the name of the new company will be Delta Air Lines. In this case Delta will be the major airline in the world and the leader in the north Atlantic routes and the second in Latin America after American Airlines.

I hope that this time the rumours will be true.

Regards from SCL,
RJ_Delta.
 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 5:37 am

Will DL remain at JFK? Or will they move it's operations over to EWR?
 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 5:55 am

Looking at the deep cuts in JFK service already, I won't be holding by breath for it to return.
 
DeltaAir
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 7:05 am

Looks like this may be for real. Expect an announcement Monday morning. I just received an e-mail from Skymiles alerting me of a major corporate announcement Monday morning.
 
blink182
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 8:50 am

Both airlines aren't in super financial trouble. Yeah, they are making losses, but still aren't at the brink of bankruptcy. I think this would only go through if it were a last minute effort to save Continental, Delta, or both. American buying TWA was a last minute effort for saving TWA, if TWA wasn't bought, it would have fallen and a bunch of people would be unemployed. American saved TWA's @ss financially. If this deal is just to merge two airlines for the heck of it and getting bigger- it will not go through. I don't want this merger to go through. Also, would Delta drop it's DFW hub if the deal were to go through?
rgds,
blink182
Give me a break, I created this username when I was a kid...
 
L.1011
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 9:10 am

Are you serious, if you are that makes a better day for me and my friend.
LONG LIVE THE TRISTAR!! Big thumbs up
 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 9:58 am

Wonder if NW will agree to this. CO has to have NW permission I belive to merge or pay hefty fees.
 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 12:31 pm

Hmm, this will be interesting to see...also, the carriers have close to the same aircraft types in their fleets.
 
KCLE
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 12:47 pm

Well, I like both airlines, and I sincerely hope they do not merge. If any merger was to occur, CLE would be the first hub to go, and this would devastate the Cleveland economy.

I truly hope that this does not happen, CLE needs CO, and it would be horrible if CO and DL merged.
 
airlinelover
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 1:59 pm

I honest to god hope it's not true.. I have flown CO, and loved it, and although I haven't flown DL, I've heard from MANY family members it's horrible. Plus, like Kcle said, CLE needs CO.. So I hope it's not true..

Someone post as soon as more is known..Please..

Chris
Lets do some sexy math. We add you, subtract your clothes, divide your legs and multiply
 
DCA-ROCguy
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:04 pm

Delta and Continental would have to be crazy to merge right now. Mergers are extremely expensive and promise all sorts of union trouble, merging seniority lists, etc. Why the stock went up on the speculation is hard to tell. It certainly doesn't make any financial sense when both carriers are hemhorraging money after 9/11.

Uncle Leo and the other Cartel-Six CEO's got the delicious taste of 'force majeure' in their mouths when they applied the principle to abrogate contracts and promptly lay off 20% of their workforces after 9/11. But Congress has passed the bailout and Bush has signed it. 9/11 will recede further behind us, the National Guard is finally entering the airports (which it should have done the day the skies reopened) and passengers will gradually keep returning to the air in larger numbers.

The crisis situation that allowed 'force majeure' to fly after the atrocities, will not last long enough to see Delta, Continental, or any of the other Cartel-Six through a merger situation. Mullin and Bethune would be very naive to think that they can just sail through a merger without serious financial, labor and operational problems during the next six months.

Of course, the other carriers will respond defensively with merger proposals if such a merger is proposed, and there's a serious chance that Justice would still rule a DL/CO merger anticompetitive the way they did US-UA. 9/11 impacted traffic at the Cartel-Six pretty evenly, except US which has lost DCA for awhile. DL/CO probably won't be able to argue that anything about the situation justifies concentrating 25-28 percent of USA air traffic in their hands.

Consolidation will probably not be able to slip through the smoke of 9/11. DL and CO can try, but DOJ will probably still nix the idea. And merging wouldn't do anything to help their house-of-cards cost structures, except maybe retiring a couple of old a/c types at DL (which can be done w/o merger). Consolidation is still a bad idea for airlines, passengers, and communities, though the gouging probably won't be quite as bad because the airlines need pax now.

Interestingly, the low-fares are probably in a much better position to weather Cartel Consolidation after 9/11. Their cash situation is much better than the majors, and they probably might even survive. Especially Southwest--which Aviation Week reports has *309* days of cash on hand, compared to less than a months' worth at the Cartel carriers.

Jim


Need a new airline paint scheme? Better call Saul! (Bass that is)
 
thomasphoto60
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:22 pm

I am with you KCLE!

If true (and I praying that it is not!) definetly a bad deal all the way around. Higher fares, additional layoffs (most likely CLE and IAH) a high probability that IAH 's hub status would be reduced to that of a SLC or CVG,despite the probability the the DFW ops would be re-located to IAH, and not to mention as KCLE pointed out, CLE would probably be history in favour of CVG.

Gordon and CO's employees have worked too long and too hard to bring CO back from the brink, as well as making it one of the most highly respected carriers flying to date, only to have it to be swallowed up by an over bloated and medicore competitior..........I DON'T THINK SO!!!!


Thomas
"Show me the Braniffs"
 
acvitale
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 2:58 pm

I have heard it from 8 different reliable sources. ALPA is not happy and the IAM is up in arms but, negotiable. This is gonna be interesting.

 
jmc1975
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:01 pm

Well, anything could be possible with the current situation. The merged DL/CO would more than likely dump DFW for IAH and JFK for EWR. The CLE operation would likely be consolidated at CVG. This would enable other carriers (American, America West, Jet Blue, Southwest) to expand and prosper in markets that a DL/CO would abandon and could not operate efficiently.

Their fleets are rather compatible. Delta has already announced they are retiring all 727-200s, MD-90s and MD-11s. Continental has announced they are retiring all DC-10s and about half of the MD-80 (-81,-82,-83) fleet. If the two carriers combine, you would likely see additional fleet types such as Delta's 737-200s and Continental's remaining MD-80s to be parked. This would enable this megasize DL/CO entity to have a diverse yet relatively simple fleet: Boeing 737-300/500/700/800/900; 757-200/300; 767-200/300/400; 777-200; and MD-88. This could be a real blessing for both carriers.
.......
 
Braniff Place
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 3:06 pm

Does this mean that DL will be still operating CO Micronesia routes such as CNS-GUM?
 
LoneStarMike
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RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 7:59 pm

Here's an article from the Houston Business Journal from late last year. The word in bold text are my emphasis.

Northwest strings stay attached as Continental regains control.
December 1, 2000

http://houston.bcentral.com/houston/stories/2000/12/04/newscolumn2.html

Investors this summer speculated Continental Airlines Inc. was ripe to be swallowed by a larger carrier.

A tailwind behind the takeover talk: Salomon Smith Barney in June trumpeted Houston-based Continental as "a likely acquiree." The old-guard Wall Street firm, a unit of financial services behemoth Citigroup, went on to bill Continental as a logical fit into Delta Airlines Inc.

Other securities industry insiders envisioned a Delta buyout of Continental, too.

But, given new developments this week, analysts say Continental will likely continue to fly solo -- unless alliance partner Northwest Airlines Corp. is itself acquired.

The U.S. Department of Justice on Monday approved a proposed settlement of its antitrust case against Northwest Airlines. The accord requires Minnesota-based Northwest to sell back a controlling interest it acquired in the Houston company two years ago: Continental now will purchase 6.7 million of its "Class A" shares from Northwest for $450 million.

At first glance, under the newly approved settlement, Continental appears to regain its independence -- emerging as master of its fate amid widespread predictions of consolidation in the airline sector.

Not so fast.

"Northwest still has veto power over any transaction" that would involve the acquisition of Continental, says Ray Neidel, airline equity analyst at ING Barings.

Note: the article says nothing about Northwest having "first right of refusal" as DeltaSFO has indicated, but rather veto power

The article goes on to say:

Northwest receives the right to influence the future make-up of the industry, to some extent, notes Michael Linenberg, an equity analyst at Merrill Lynch.

Other Wall Street insiders put it more strongly. Northwest "still maintains its crucial consolidation `catbird seat´," Salomon Smith Barney notes in a report published last month before the Justice Department´s approval of the settlement was announced.

"Should someone -- let's say Delta -- wish to purchase Continental outright with no proposed change in control at Northwest, such third party would still need to obtain approval from Northwest," Salomon adds.

Still, Merrill Lynch sees the settlement as a positive for Continental shareholders. "Northwest's role in the governance of Continental has been diminished," notes analyst Linenberg.

Continental is issuing preferred shares to Northwest, allowing the Minnesota carrier to retain its power to veto the sale of Continental to a rival.

Meanwhile, recent insider selling in Continental shares by top executives suggests the Houston-based carrier isn't on the verge of selling itself for a tidy premium. Since the end of the first quarter, according to Thomson Investors Network, Continental insiders have shed or filed their intent to sell company stock worth more than $70 million.

At $61.63 Tuesday, Continental "A" shares had doubled from their 52-week low. The stock hovers about 10 percent off its 52-week high of $68.50, reached in early November when Continental and Northwest agreed on the settlement.

Under their deal, Continental is purchasing the 6.7 million "A" shares from Northwest for about $67.26 per share, Salomon notes. Northwest also hangs on to about 2.6 million shares of Continental "Class B" stock, which was near $47 Tuesday.

In May takeover rumors swirled around Continental and other airline stocks after United Airlines parent UAL Corp. announced a bid to acquire U.S. Airways at a substantial premium. The Justice Department has yet to issue a final ruling on the UAL-U.S. Air tie-up, which is hardly a slam dunk in the eyes of analysts.

Continental "has speculative appeal as a potential acquisition target should currently proposed airline mergers succeed," notes Standard & Poor's equity analyst Stephen Klein.

Plus, Continental has aggressively repurchased its stock, enhancing earnings per share. Mix in passenger demand, and Continental would leave the gate as an enticing catch for a bigger carrier.

But for now, an acquisition of Continental looks unlikely, unless its long-term alliance with Northwest is rerouted by the takeover of the Minnesota-based carrier.

If the Justice Department green lights UAL's proposed buyout of U.S. Air, takeover buzz will pick up. And, according to Salomon, Northwest and Continental will each be takeover bait for potential acquirers Delta, UAL and American Airlines parent AMR Corp. Continental remains independent, but its top executive believes other airline acquisitions will eventually take wing.

"Consolidation in the airline industry may or may not be imminent," Continental Chairman and CEO Gordon Bethune said in a speech this summer. "But it does seem to be inevitable."

Is there a difference between having first right of refusal and having veto power? If so, this article leads me to believe that Delta would have to acquire Northwest if it wanted Continental.

Read on...

From the Atlanta Business Chronicle:

Delta, Northwest, and Continental airlines in consolidation talks
January 31, 2001

On the heels of consolidation by competitors, Atlanta-based Delta Air Lines Inc. (NYSE: DAL) has begun consolidation talks with Continental Airlines (NYSE: CAL) and Northwest Airlines (Nasdaq: NWAC), according to the Wall Street Journal.

Representatives from the three airlines would not comment on the talks, but the paper reported discussions included whether Northwest would veto a Delta purchase of Continental and the possibility of a merger between Northwest and Continental.

AMR Corp., parent of American Airlines, and Trans World Airlines Inc., recently announced merger plans, as have UAL Corp., parent of United, and US Airways.

In Wednesday afternoon trading, Delta sock was down 28 cents to $46.85 a share, while Northwest stock was up 81 cents to $26.19 a share and Continental stock was up $1.13 to $52.29 a share.

So let's say Delta wants to acquire Continental. Is there even a remote possibility that Northwest would ok the deal? It seems hard to imagine, but I guess anything is possible. If not, and Delta's announcement on Monday has to do with all three airlines merging, would the DOJ approve it? This also seems hard to imagine, but if it's one thing I've learned in the past three weeks it's "Never say never". Still, two airlines merging is complicated enough, but three? I shudder to think about it. Or, as some others have speculated both in this thread and ones from several months ago, Could Continental be the acquiring entity (of Delta) and leave Northwest out in the cold? Ugh..too many possibilities.

Monday should be interesting.

LoneStarMike

 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 9:05 pm

What could happen(but very small possibility though.) is that Leo Mullin walks up all cool-like to Anderson, starts a conversation, and hints how he has this JFK hub thing, but with the merger happening, he don't need it no more cuz they have Newark, so he wants to find someone wit no northeast presence to give it to. And, whew! Leo would only keep it if the merger went through.

 
Guest

RE: DL/CO Merger Rumours Flying Throughout ATL And IAH

Sun Sep 30, 2001 9:07 pm

I'm an idiot! replace the last 'Leo' in my story with 'Anderson'.

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