Not Just One Merger!

billreid · Sun Nov 19, 2006 4:54 am

After the initial offer from US for DL while in CH-11, the offers started to mount. UA-Tilton has been shopping for a dance partner.

Most insiders expect an offer from Tilton as well for DL.

AA has been on the phone with NWA looking at the possibility of an outright purchase as long as it occurs while NW is still in CH-11.

Rest assured that every merger possibility is being analyzed inside each airline from a route and impact perspective.

The question is how everything will shake out.
Popular opinion is:
AA buys NW and remains with OneWorld
US buys DL and moves to SkyTeam
UA merges with CO and remains in Star

I am interested what everyone in the know believes.
Will any of the mergers occur?
Can we have only one, or will a feeding frenzy occur?

Has Parker jump-started industry consolidation, and who will be the winners and the losers when the dust settles?

ksupilot · Sun Nov 19, 2006 5:03 am

I think we'll all be the losers if these all go through. I am completely against any merger between UA and CO. CO is doing more than fine on its own, it doesn't need UA to come in a mess everything up. What is the old saying...'If it ain't broke don't fix it".

In terms of DL and US...well you could say it is two messes combining into one big mess...however, DL is getting back on its feet again. I don't see this going through and I hope DL fends it off.

steeler83 · Sun Nov 19, 2006 5:24 am

Quoting KSUpilot (Reply 1):
DL is getting back on its feet again. I don't see this going through and I hope DL fends it off.

I have been posting this in other threads as well. DL has done a considerable amount of work to cut costs and boost profits. Unfortunately, the cost cutting involved salary cuts and numerous expenditure cuts. But, how else do you expect to maximize profits when you're losing money? I would rather make less than I did than to have my company go broke and me wind up on the street holding a sign "will work for... whatever..." However, some employees do find work elsewhere, but the way the job market is these days, that isn't very easy either...

Now, on the profit boosting side, well, DL has spent a great deal of money here. They opened a new hub in JFK and are growing that like mad. They are adding several international routes into and out of JFK, as well as ATL, to boost profits. They also upgraded their baggage checkin and ticketing facilities in ATL to boost customer satisfaction and entice more flyers to their airline, also adding to the green.

I have a great deal of respect for DL, and I hope they can pull this off alone. For the time being, this talk of a US/DL merger gives us something to talk about nonetheless, things to ponder and consider regarding livery, airports, markets served from given airports, alliance partner changes, alliance changes for that matter and so on. Do I see this happening? I highly doubt it. I wish I had access to a crystal ball to answer all the questions "what if..." as it looks very unlikely...

ksupilot · Sun Nov 19, 2006 5:35 am

I want to see DL come out of all this still going solo. There was even talk of them trying to re-invent their image with a new livery. Not so sure about this as the Wavy-Gravy has grown on me. But when you think about it, if you just paint the aircraft they go in for regular maintenance it won't cost extra to come up with a new image.

What would be a better way to flip US the bird than to slap the widget back on the tail and maybe come up with some new slogan refers to them still being solo.

ChiGB1973 · Sun Nov 19, 2006 6:04 am

Quoting BillReid (Thread starter):
AA has been on the phone with NWA looking at the possibility of an outright purchase as long as it occurs while NW is still in CH-11.

Just about to be able to start hiring entry level employees rather than the high dollar FAs from TWA, it's doubtful AA wants the employees.

http://www.wcnc.com/sharedcontent/dw...tories/090906dnbustwa.10d4dbf.html

http://www.joplinindependent.com/display_article.php/admin21162773109

Do they want to wait another 5 years?

It's one of the first things that crossed my mind when I thought about that merger. Not sure what ramifications this would have?

M

[Edited 2006-11-18 22:11:29]

Qazar · Sun Nov 19, 2006 6:50 am

It's been a long time now that industry leaders have been saying that mergers and acquisitions (M&A) are inevitable and long over due...

Look at what's happening in Europe... LH which has always been a trend setter in the industry has been rallying for M&As forever now. They were the first to take the KLM/NWA alliance to a whole new level by creating the Star Alliance - the first step to M&A (some will argue that the Qualiflyer Group was the first attempt, and I agree. But Star is the one that got the formula right). Less than 2 yrs later names such as "Star Alliance", "OneWorld", and "SkyTeam" were part of the everyday travellers' common vocabulary - the same as saying "TWA" or "PanAM" back in the Golden days. Then they were the first airline to acquire another country's national carrier - LX. Now talk is starting to go around of their huge cash reserves that's being positioned for yet another purchase, and the OS, BMI, LOT and SAS groups are the frontrunner candidates to join the LH family eventually. Now this may take years if not decades, but eventually it will happen. And yes, the cash reserves are partly meant for the upcoming large aircraft order everybody has been talking about, but not entirely. LH has been very vocal for years about its intention to control part of the European market, and if they're not able to do it through nice friendly alliances, they'll purchase that control outright. My money is on OS personnally, but that's a completely different topic. And although LH is denying any upcoming purchases, their business sense will not let them leak such info to drive the share price of any potential purchasee up, and therefore the acquisition cost.

This isn't a European phenomenon, but a worldwide one. Europe was the first to feel its effects because of the shear number of world class airlines based in such a small geographical area (LH, BA, AF, KL, LX, SAS, IB, AZ). And although the US market is geographically larger, the same effect exists with monster airlines like UA, AA, CO, DL, NW, and US all competing against each other... and that's just for the domestic market. When you consider the US' position as an international destination market, the big 6 are now competing with the likes of SQ, CX, BA, LH, AF, KL, JL, QF,... and airlines far greater and more popular. Just take an example, if you were to fly out of LAX to Singapore, what would you prefer to fly: UA or SQ (forget they are in Star). What about JL, TG, CX,... how many far Eastern airlines would you choose before you settle on UA. The US market desperately needs mergers and acquisitions, and they need yesterday.

I personally don't see how competition, and therefore low airfares, are going to be jeopordized by the existance of 1 or 2 less airlines of the above list. Whichever airline merges with whichever other airlines, routes are going to be taken over, as will hubs, aircraft, operations,... True, there will be a period of adjustement where prices will fluctuate both for and against consumers; but opportunities will also be created, new players will enter markets previously off limits, and life will go on. The market will always adjust and reach balance.

If UA merges with CO, they'll do it because the synergies of both airlines will complement each other, and at the end of the day, UA will have a southern hub (Houston) - which presently it doesn't have being based in IAD, ORD, DEN, SFO, and LAX - and therefore access to the Southern catchement area which it doesn't get with its present network. It will also have access to the Greater New York area (through CO's EWR hub), one of the world's most important O&D markets, which again UA presently doesn't have access to. And, yes, with DL and AA already based in JFK, a UA/CO marriage would make sense if we're going to foresee 3 great US airlines led by AA/whoever, DL/whoever, and UA/whoever.

So I do agree, and I have said it numerous times before on other threads, I have always believed that a UA/CO merger made much more sense than the previously attempted UA/US merger (see a few years back). DL would actually do better with NW, especially considering their existing ties with AF and KLM which run far deeper that the European airlines' ties with CO - making CO's escape from Skyteam towards Star much easier. But even without the European connection, DL/NW makes sense on even a network basis especially if you consider NW's Asian services complementing DL's much smaller operations to the continent, and vice versa for the European services that are much better served by DL than they are by NW.

As of AA, I don't think that they are a really good match with US, nor that both airlines should merge just because they're the odd 2 left. AA already has a pretty good operation spread out throughout the US with hubs very well strategically positioned all over the place to take advantage of all important catchment areas. JFK for the North East, ORD for the Mid-West, Miami in the South, DFW for the Southern states, LAX for the West Coast. And these hubs are supported by also well placed focus cities. Although they may lack a hub in the mountain time zone (DEN for UA), they remain the best strategically operated airline in the US. In my opinion, they don't need a merger... besides they already did that with TWA a few years ago, so time for the others to play their cards. This leaves US without a partner, which is the reason why they have been so hungry lately for mergers - they may realize that if they're not the first to seek it, they may be left to play in the sand box alone against all the big bullies. Personally, I have no idea what should be their best place for them. They'd be excess capacity and burden on any of the other 3 groups (UA/CO, DL/NW, AA).

Eventually this trend will also shift to the Asian market, as we have already seen with the Chinese market - the big 3 controlling groups; and as can be seen with what's been happening with CX and CA, and CX and Dragonair.

Sorry for the huge novel... I don't write on many threads as can be seen in my profile, but when I do, it's long...

Charliejag1 · Sun Nov 19, 2006 7:08 am

Quoting KSUpilot (Reply 1):
In terms of DL and US...well you could say it is two messes combining into one big mess...

Check US's financial statements, I believe its one mess and one of the best run airlines in the nation, not two messes.

timboflier215 · Sun Nov 19, 2006 7:33 am

Quoting Qazar (Reply 5):

A very interesting and well thought out post, thank you! One thing that is missing from the equation, though, is the DoJ. Will the US government bodies which oversee such things, and which are, by all accounts, highly conservative when it comes to the idea of mergers, approve such large mergers, no doubt with the LCCs screaming about reduced/unfair competition etc etc?

fewsolarge · Sun Nov 19, 2006 7:56 am

There's one thing that American would be interested in from Northwest: the Pacific division. The rest is three central hubs which AA already has surrounded. Why would they want to buy all that redundancy? If they're going to make a purchase, it should be only for what they need.

diamond · Mon Nov 20, 2006 3:03 pm

Not Just One Merger!

Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

RE: Not Just One Merger!

Who is online

Popular Searches On Airliners.net