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Delta/CO Merger

Fri Jul 14, 2000 5:29 am

Since the board is a little slow here's a topic:

Should DL and CO merge what new routes do yall think will develop from the hubs? Particularly IAH. It is common knowledge that if the merger happens DFW will be scaled back with a tremendous focus on IAH, EWR will be kept, and CLE would most likely be scaled back in favor of CVG. What type of route structure could we expect?
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RE: Delta/CO Merger

Fri Jul 14, 2000 12:15 pm

Okay, I'm glad this came up again. I think Delta should buy out Continental. If this happens, I think Delta will cut back at CLE, and cut back on DFW, Since IAH is a goldmine!!! I think IAH will the their 2nd largest hub (Behind Atlanta) IAH will get a lot if Domestic, and Int'l Flights wit a lot of widebodies. I havent figured EWR out yet.

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RE: Delta/CO Merger

Fri Jul 14, 2000 12:33 pm

A DL/CO merger would perhpas consolidate two mature East Coast/Latin America/Europe operations and result in a strong airline focused on developing in Asia and the American West.

I think that the DL/CO hub structure in New York is complimentary. Delta uses JFK primarily for O/D traffic, with a limited number of feeder flights to its connecting hubs and larger domestic markets, and it's West Coast cities. Continental has developed Newark as a true connecting hub, pulling in feed from all over the country. A combined DL/CO could easily maintain lucrative O/D operations at JFK and international connecting opps at EWR. Say what you will about monorails, airtrains, and the like, most New Yorkers (myself included) vastly prefer a trip to JFK than to EWR -- given the prevailing auto traffic conditions, Manhattan's West Side is really the only part of the city more convenient to EWR. Besides, Jersey is anathama to Manhattanites! For this reason it would be wise to focus O/D opps at JFK, and connecting (and New Jersey O/D) at EWR. Coast-to-coast flying would be profitable at both airports, and the combined CO/DL could reserve LGA for the VERY lucrative business market (to Boston, Washington, Atlanta, Chicago, Philly, Miami, Detroit, Dallas etc . . .). Most of these markets have their own European service or are closer to other international gateways, and hence don't need to feed into JFK for international flights. As for the New York's Latin America service, most of that is O/D as well, as people elsewhere in the country connect through Miami, Houston, or Atlanta.

Which brings me to the other opperating efficiencies of a combined DL/CO: Houston is a goldmine, and Delta could basically pull out of Dallas in favor of this little gem. Cleveland would give way to Cincinnati, of course. The midwest is the undisputed champion for connecting traffic (almost major has a hub in the midwest: ORD, DTW, CLE, CVG, STL). Chicago, like JFK and, to a certain extent, ATL, is becoming more and more of an O/D market. Besides, AA and UA already duke it out there. Detroit is, to phrase it politely, less than desireable, and in the collective American unconscious is synonymous with a trip to hell. (Once NW is bought out, it will probably see its opps reduced). Long and short, CVG is the best-positioned midwest hub, and Delta's opps there are a license to mint money.

Shoring up these operations would leave the combined carrier a strong position to develop Asia and West Coast service. I have long believed that Delta could become the dominant East Coast carrier to Asia -- what with increasingly sophisticated planes and growing markets, direct service from New York (and Atlanta) to major Asian destinations is entirely feasible. There is no really convenient way to get to Asia (with the exception of Tokyo) from the East -- most flights must connect through Detroit or LAX/SFO.

Perhaps DL/CO could also build up at LAX (DEN? SFO?) and could pull down SLC -- yields there aren't too profitable.

Your thoughts . . . and apologies for the stream of consciousness style of this post!


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RE: Delta/CO Merger

Fri Jul 14, 2000 12:46 pm

At least their fleets will be quite compatible. Both airlines have (or will have) large fleets of 737s, 757s, 767-200ER, 767-400ER, 777-200....did I miss any?
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RE: Delta/CO Merger

Fri Jul 14, 2000 12:47 pm

MD-80's, both have a lot of them.
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Fri Jul 14, 2000 2:03 pm

I Agree wit pretty much everything you said, Especially the part about ditching SLC, I would like to see Delta build up LAX

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Fri Jul 14, 2000 4:15 pm

Good one JT8D  
"Aviation & Black hole carry same effect,once any where near it you're bound to get sucked in".

RE: Delta/CO Merger

Fri Jul 14, 2000 10:29 pm

Ezra, your view of the merger is very NYC centric, or even Manhhattaner-centric.

While it is tru for the O/D traffic from Chicago and Detroit, still a lot of midwest travelers to European destinations use connections at JFK.

Both UA and AA have limited routes to non-major European airports, and if one wants to the city other than some of the big ones, still has to use connecting flight to Delta at JFK.

You want that to be moved to EWR, fine. But make sure, that the connecting flights have close access to international terminal (and the same airport), or otherwise, Midwest will use London and Paris for connecting flights to elswhere in Europe.
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RE: Delta/CO Merger

Fri Jul 14, 2000 10:37 pm

If Delta and Continental merge, the focus would be on the Houston hub,
which is now up to 552 daily departures (according to Continental's web-
site, quarterly updates). The DFW operations of Delta would be scaled
back. I think growth at CLE would end, since the airport is at or near its
capacity anyway and cannot handle big jets due to its runway situation.
The Newark hub would be folded with the JFK operation, but many of
the overlapping European routes would have to be pared as this would
face tough antitrust scrutiny, not to mention the New York City political
machine, which would fight the merger in the interest of NY area jobs,
and the cost to consumers.

The Atlanta hub would continue virtually unchanged, and the CVG hub
would also remain unchanged. The West would be a weak spot in this
scenario of a merger, even with DL's Salt Lake City hub, which I heard
on this forum is inefficient and costly, due to taxes. Perhaps DL/CO
would consider buying up the rest of America West, then you've got a
serious challenger to US/UA nationwide.

Fleet commonality is not really a problem and DL/CO would be a huge
powerhouse across the Atlantic and to Latin America, as well as on the
East Coast and to some extent, the midwest. DL/CO would be a fierce
competitor to US/UA and probably relegate AA (even with a NW tie up)
to a distant third in the East.

But despite all of this, I do not think this, or any big airline mergers,
will happen.

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RE: Ezra

Fri Jul 14, 2000 10:48 pm

Some points...

1. I wouldn't say most New Yorkers vastly prefer JFK over EWR. EWR is very easy to get to, and with a direct train link opening to Midtown soon, it will be even easier (although I'm sure what airport you prefer depends on where you live).

2. ORD is not becoming more of an O&D airport as you contend. UA and AA are connecting a greater percentage of people there than ever before. O&D traffic has increased as well.

3. Even if NW is bought out, I doubt you'll operations at DTW be reduced. Not with a brand new terminal, and not with a ton of businesses located in the Detroit area. The city may not be great itself (you said it, not me), but that has nothing to do with being a profitable operation.

4. CVG is not the best Midwest hub. It's too far east. A traveler in, say, Indianapolis, is not going to travel east to CVG if he's going west to LAX. Besides, there isn't anywhere near the O&D traffic as at other midwest airports.

5. DL will not build a hub in LAX, SFO or DEN anytime soon. Why would they go head-to-head with a giant like UA? Unless DL buys America West or Alaska, don't look for them to build their west coast operation. I think their recent history (last 10 years) has shown they don't want to put resources out west.

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RE: Delta/CO Merger

Sat Jul 15, 2000 12:07 am

I'm not sure what I think of Continental being acquired... I've grown so used to it as being the hometown airline that I really am not sure what to think.

I think there are benefits and problems associated with outright airline acquisition.

(+) Better network coverage for frequent flyers
(+) More connection options through more hubs
(+) Possible offering of more out of hub direct routes (e.g. florida to northeast, west coast shuttles, mini-hubs)
(+) More out of network partnerships for more destinations
(+) Less regionalization and more globalization of the end product

(-) Increased passenger costs due to higher costs and risks to new startup carriers
(-) Service quality may be sacrificed with increased volume

Personally, I think that the concept of alliances (e.g. CO/NW/HP/HA/AS ) provides many of the same benefits but with far less impact of problems on a large scale.
(+) Better coverage through codeshares
(+) Frequent flyer mileage on any of partners sites
(+) More connection options through more hubs
(+) Less regionalization and more globalization of the end product

(-) Increased passenger costs
(-) Restrictive code share agreements (limited seats available for codeshare)
(-) Possible termination of partnerships

With all this said, thinking about specifically Delta and Continental from a passenger perspective:
I would not have much problem so long as the existing hubs were to be kept as is. As a passenger based out of a hub city, nothing would be more frustrating to see your airline vacate your airport and your frequent flyer status will inevitably suffer - Less direct flights means less incentive to use that particular airline. Costs may decrease, but the sense of abandonment would be a bit much to take. Continental has been doing very well out of its hubs and Delta really needs SLC for the moment for a west (but not west coast) connecting city.

Sorry for the long post!
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RE: Delta/CO Merger

Sat Jul 15, 2000 12:37 am

I don't think these mergers will come to fruition. I would rather see our hometown airline stick around with its own identity. Also, I believe that Delta's service is inferior to Continental's-I stopped flying Delta because of their poor customer service and stressful hubs. Also the scaleback of IAH flight sdidn't help either. The plus side to the merger I see for IAH is an expanded route structure and plenty of widebodies.
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RE: Delta/CO Merger

Sat Jul 15, 2000 12:42 am

The only weak spot would be the western US. DL/CO would need to expand out there.

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