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Which Is A Better Merger: UA/CO Or UA/DL?

Wed Sep 12, 2007 10:30 pm

I know consolidation has been discussed on A-Net to death but I don't think this exact question has been discussed so specifically, at least as far as I can tell.

The question is: From UA's perspective, which airline makes a better merger partner, CO or DL?

ROUTE SYSTEM The irony is that both CO and DL have very similar looking route systems. I think both would make good partners since they both have a New York area hub with a strong European network; a UA weakness. They also both have a southern gateway, also a UA weakness.

EWR vs. JFK They are both in the New York area and both airports seem maxed IMHO. Is DL's JFK operation is stronger to Europe but is there more competition? Which is the preferred hub? Advantage DL?

IAH vs. ATL They are both southern hub gateways, but very different because of their geographic location. Because most of South America and the Caribbean sit to the south and east of the US, ATL seems like a better hub because it can more directly feed the US (especially the East Coast) to South America and the Caribbean. Likewise, IAH is better suited to feed Mexico from the West Coast but is equally suitable from the Midwest and the East Coast. Central America's location seems about wash for IAH or ATL. Splitting "Latin America" into separate regions (Mexico, Central America, Caribbean, South America) which hub would be better suited for UA, IAH or ATL? Advantage DL?

CLE vs. CVG They are both "Ohio" hubs and I think that with UA's ORD hub, both would be downgraded to a focus city; correct? I assume DL at CVG is much bigger; correct?

SLC Because UA has DEN, SFO and LAX, I would assume this would become a focus city.

GUM I think CO's Micronesia system would complement UA's pacific and Hawaii network beautifully. I would hope to see direct flights from SFO to GUM in the future as I am surprised that CO does not have any direct flights to GUM from the mainland even though it is within the 772ER's range. I guess CO's hub locations aren't suited for such a flight; maybe a future 787 flight. Advantage CO?

ORD, DEN, SFO have little overlap with either CO or DL so they would virtually remain unchanged. I think they would all be boosted by the additional feed from either CO or DL's network; especially the Asia routes.

IAD has overlap with EWR, JFK and ATL but IMHO is strong enough to remain a UA hub.

LAX A focus city for DL would become a stronger hub for UA. Advantage DL?

FLEETS The other irony is that CO and DL have very similar fleets, almost identical IMHO and not too different from UA except for the narrowbody fleet and the engine type. Is the engine type really a problem? Look at DL, they have RR, GE, PW, and CF....

Narrowbodies. This is the biggest obstacle. DL's older narrowbodies are MDs and their new fleet are 737NG. CO's older narrowbodies are 737classics and their new fleet is 737NG. Of course, UA's older fleet is 737classics and their new fleet is the A320 family. With such large fleets of all types, is this really such a big obstacle? Couldn't they create a system like AA where certain hubs are a base for a fleet type. Eventually, this could be narrowed down to 2 types, A320 and 737NG. Slight advantage CO because of the 737classic commonality?

757 CO uses RR. DL and UA both have PW engines. Advantage DL?

767 CO and DL both have GE except that DL has a mix of PW and GE for their 763ER fleet; why is that? UA of course has PW engines. Advantage DL?

777 CO has GE. DL will have GE and RR once the 772LR is delivered. UA is PW, again.

787 CO has ordered the GE, surprise surprise. PW isn't even offered for the 787. Advantage CO since they already have an order in for the 787.

747 Only UA has this type which is large enough to sustain itself. I wonder if there are any DL or CO routes that could use a 747, like ATL-NRT or IAH-NRT or EWR to HKG or EWR to PEK?

Please keep this thread on track by sticking to the original question. I don't want to get into discussions about politics, management styles, "it will never happen", unions, etc. I would like the discussion to be primarily route network and fleet discussion; understanding that there is a lot more to a merger...
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RE: Which Is A Better Merger: UA/CO Or UA/DL?

Wed Sep 12, 2007 10:35 pm

My vote: Neither. No mergers. For now the industry is doing OK. The HP/US merger is now in it's third year and still not completed. Merging UA with anyone would be a logistical nightmare. Why not let carriers either stand on their own and succeed, or fail on their own? I for one do not want to see another rerun of the 80's when merger mania took away some great old airlines and left us with some very mediocre current airlines.
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RE: Which Is A Better Merger: UA/CO Or UA/DL?

Wed Sep 12, 2007 11:05 pm

Quoting SkyyMaster (Reply 1):
My vote: Neither. No mergers

I second that vote for all the same reasons. Let us see just how long the US/HP merger takes to finalize and have one operating company/certificate.

[Edited 2007-09-12 16:06:04]
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RE: Which Is A Better Merger: UA/CO Or UA/DL?

Wed Sep 12, 2007 11:27 pm

I third the motion , AND this issue has been discussed to death from every possible conceivable perspective.
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RE: Which Is A Better Merger: UA/CO Or UA/DL?

Wed Sep 12, 2007 11:27 pm

Thanks for answering the question...  

Quoting SkyyMaster (Reply 1):
For now the industry is doing OK.

OK is generous, they are all barely making a profit. A downturn in the economy or major terrorist attack would send all of the airlines back into the red in a heartbeat. That said, I don't think mergers are the answer.

The reason I am bringing this up is that it the UA network combined with either CO or DL would create a truely "national airline" with hubs in the three largest metro areas, NYC, ORD and LAX along with three other major metro areas, IAD, SFO and (IAH or ATL). In addition, with hubs on all "coasts" the global reach would be very strong in all directions, Asia, Latin America, and Europe.

I agree that I would like to see all of the companies stand on their own, which I think they all can do; although NW is questionable. My question is more a question of: If UA was to merge, who would make a better partner?

[Edited 2007-09-12 16:28:50]
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RE: Which Is A Better Merger: UA/CO Or UA/DL?

Wed Sep 12, 2007 11:46 pm

Quoting SkyyMaster (Reply 1):
My vote: Neither. No mergers. For now the industry is doing OK.

Not so sure about this statement as respects the US domestic market. The airline industry is currently on and will be on life support for quite some time. The legacy carriers still cannot figure out how to manage in an unregulated world - matching or bettering your competitor's expense structure worked during regulation, but not now. However this is still the major driver. The LCC's on the other hand spend very little and as a by-product have zero customer service (except SWA.) Most of the LCC's are one major industry disaster away from oblivion. Even now SWA is struggling as their fuel hedging competitive advantage is disappearing.

Consoladation is the only way the industry can gain any type of traction. An airline has to be able to maximize its revenue - and I mean more than revenue per seat mile on a computer program, and minimize their expenses without sacrificaing customer service.

DL and NWA have the cleanest pages, but "old economic" thinking is creeping back in. UA appears not to have taken anything from their clean sheet - they are quickly falling into the dead men walking category.

This is somewhat rambling, but the point is the US domestic airline industry is in horrible shape with no one seeing to have a way out.
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RE: Which Is A Better Merger: UA/CO Or UA/DL?

Thu Sep 13, 2007 5:11 am


Here's my brief take-- A DL/UA merger, hub-wise and 757-wise, makes good sense to me. ATL simply dominates the southeast, where UA is so weak, while DL's operations at BOS, LGA, and DCA are very attractive. ORD, DEN, SFO, and with DL, LAX, would only grow stronger. My concern is with SLC and CVG. Orrin Hatch, and all of Utah, would be against this merger, as SLC would likely lose out to DEN. Ohio would lose its strongest hub, most likely, as well. The biggest concern to me would be the resulting chaos for employees. If SLC and CVG were downsized the way DL downsized DFW, thousands of workers, including many senior ex-Western people, would either be forced to move or lose their jobs. DL and UA pilots share a union, but their camps would surely fight long and hard over seniority issues. DL's other employee groups could potentially lose out, if UA were to be the acquirer and their unions fought to "staple" DL's workers to the bottom of their seniority lists. That would be disastrous for DL workers, especially their flight attendants, in my opinion. With only one big union group at DL, however, I would expect a faster combination of work rules -- that is, if you do not think DL's and UA's wholly different "cultures" wouldn't make for bitterness. Finally, the lack of pension issues at both newly restructured UA and DL make for common ground on that front.

A CO/UA merger, fleet-wise, would be cumbersome, but with so little hub and route overlap, few frontline employees would face relocation or job loss, unlike at DL. Perhaps CLE would be downsized, but compared to the potential slashing at SLC and CVG, the hubs would change little, in my opinion. CO/UA would remain rather small at BOS/LGA/DCA, compared to a DL/UA, but for now, at least, EWR seems to be a stronger New York area hub than JFK. CO's and UA's many unions would create similar fights to US's current battling, and I'd expect CO's pensions vs. UA's lack thereof to be a roadblock. I'm not sure how significant CO's Guam operation would be in a combined trans-Pacific network, but it certainly adds strength.

Either merger, while good-looking on paper, would be so difficult to pull off. I enjoy dreaming of a worldwide United with either CO or DL management, but just imagine the logistical nightmares of merging fleets, unions, workers, cultures... and can you really ever imagine landing at ATL and not seeing a neon-lit "Fly Delta Jets" sign? Just try changing it to "Fly United Jets" or "Fly NWA Jets." Sacrilege!

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