Anybody Heard The Dl Merger Rumor?

[Blackdog]

I guess the title of this forum topic sums it up! I have had several DL employees asking about an eminent merger between NW and DL. I've told them that on our (NW) end we haven't heard that one. But a crew eating in FRA alongside us and some others at the airport in ATL are convinced its a done deal. My question is who's got any money to buy anybody else? As an ATL commuter, I can only dream of parking at the airport and checking in for my flight! Anyway just checking the winds of rumors out there.

 

[Beer Guzzler]

I guess the title of this forum topic sums it up! I have had several DL employees asking about an eminent merger between NW and DL. I've told them that on our (NW) end we haven't heard that one. But a crew eating in FRA alongside us and some others at the airport in ATL are convinced its a done deal. My question is who's got any money to buy anybody else? As an ATL commuter, I can only dream of parking at the airport and checking in for my flight! Anyway just checking the winds of rumors out there.

[post="279532"][/post]​

Yeah, here in Atlanta.. Rumors are DL & NW merger or DL & CO merger. Of course those are just rumors and in todays aviation that's about all you have, rumors.

Besides, I doubt the government would let DL merge with either NW or CO. The resulting airline would be huge.

In time we shall see..

 

[jimntx]

Were you out sick the last 4 years? The rumors of a DL/NW or DL/CO or DL/NW/CO merger have been around since not too long after 9/11.

Just be aware, if it were anywhere close to being a "done deal" it would have to be public by now. Both are publicly traded companies, and Federal securities law requires disclosure of major corporate transactions.

 

[Bigsky]

Since 9/11? I've heard the Delta and Northwest merger rumor since 1970. Not going to happen for a while or at least I hope not.

 

[WorldTraveler]

NW is at a crossroads in its existence for sure. They have major issues confronting them - perhaps more than any other airline so far: labor strife (nothing terribly new for NW but the fragile economy could turn any hiccup into pneumonia), high fuel prices with a fleet that is 1/3 composed of inefficient aircraft, alliance jockeying, plus being the last of the legacies to restructure.

There are many positive things that could be said about a DL-NW merger but one thing can be said: it will require alot of outside help to pull off. It doesn't appear that CO is real interested in playing the merger game as acquiree which leaves NW's future even more cloudy if consolidation occurs but CO could easily do something with either NW or UA with outside help. Realistically, DL and NW need someone more than CO does. Lots of AA people think AA would go after NW but I'm not sure they would be willing to pay the price of absorbing all of NW just to get the beyond Japan rights since AA already has a fairly significant presence to/from NRT. Further, the gov't might have problems with the size of AA's midwest presence if they combined w/ NW and it isn't realistic to think they would buy NW and tell the gov't they are selling off the midwest hubs in order to get the deal passed. In contrast, neither CO or DL have a significant enough midwest presence to really pose a threat when combined with NW. CVG, while a good sized hub, is largely connecting traffic.

It is very possible that part of NW's strategy if anything goes wrong in the restructuring game is to head to bankruptcy court, torch all kinds of contracts, and put themselves up for sale.

 

[Bigsky]

WT
So what's Delta's plan when they file? NW maybe be making the news frequently lately because of a potential AMFA strike/lockout but that does not erase the fact that the next carrier to file BK will most likely be DELTA. Good luck bigsky

 

[FWAAA]

Lots of AA people think AA would go after NW but I'm not sure they would be willing to pay the price of absorbing all of NW just to get the beyond Japan rights since AA already has a fairly significant presence to/from NRT. Further, the gov't might have problems with the size of AA's midwest presence if they combined w/ NW and it isn't realistic to think they would buy NW and tell the gov't they are selling off the midwest hubs in order to get the deal passed.

[post="282493"][/post]​

If AA were to buy NW, it would gladly spin off the MSP and DTW hubs (or a portion of them) to whomever wanted them.

I agree that NW's NRT routes aren't the jewel that AA covets. You didn't mention it in your post at all: CHINA is why AA might make a play for NW. The NRT Fifth Freedom rights are gravy. Sure, AA finally won the right to fly to China, but just once a day to one city. Buying NW would instantly give AA what it has coveted in China for over a decade.

 

[WorldTraveler]

FWAAA,
Does NW have rights to more Chinese cities than what it currently serves through NRT? And are those rights still active since most do go inactive or can be claimed by other airlines ? (as UA has found that DL has "stolen" some of its unused Brazil frequencies?

The real jewel in Asia is the Chinese world which includes HKG, SIN, and to a lesser extent TPE. Unless NW has those routes, I doubt very seriously that AA would be interested in just serving these cities via NRT although that is a great way to get your foot in the door.

I think AA's decision to add its own multigateway US-NRT flights plus the duplicate midwest hubs would kill any possibility of an AA-NW deal. Hubs are not real valuable right now and the DOT plus constituents in Michigan and Minnesota would make sure a NW-AA doesn't go through if all it results in is reduced air service and thousands of laid off employees which is the only way any other airline would be interested in those hubs.

 

[FWAAA]

FWAAA,
Does NW have rights to more Chinese cities than what it currently serves through NRT? And are those rights still active since most do go inactive or can be claimed by other airlines ? (as UA has found that DL has "stolen" some of its unused Brazil frequencies?

NW has 29 weekly frequencies to China, more than any other USA carrier. AFAIK, none have to be flown from NRT; they could just as easily be flown as nonstops from LAX, SFO, DFW, ORD or any other hub.

The real jewel in Asia is the Chinese world which includes HKG, SIN, and to a lesser extent TPE.  Unless NW has those routes, I doubt very seriously that AA would be interested in just serving these cities via NRT although that is a great way to get your foot in the door.

I gotta disagree with you here. SIN and TPE are open skies; AA flew SJC-TPE for a few months until September 11 killed the route. SQ is miles ahead of any other carrier to SIN. Everybody and their brother flies to HKG - and no USA carrier can ever hope to match the service of CX.

I think AA's decision to add its own multigateway US-NRT flights plus the duplicate midwest hubs would kill any possibility of an AA-NW deal.  Hubs are not real valuable right now and the DOT plus constituents in Michigan and Minnesota would make sure a NW-AA doesn't go through if all it results in is reduced air service and thousands of laid off employees which is the only way any other airline would be interested in those hubs.

[post="282609"][/post]​

You may be right. But the USA still has too many hubs chasing the declining number of pax who need to connect at them as the point to point LCCs continue to erode at the legacy carriers. Of MSP, DTW and MEM, NW clearly has too many hubs. Much like DL with its CVG, ATL and SLC hubs. Too many. With the dehubbing of DFW, DL has made some strides towards hub rationalization, but there is still much work to do.

You do remember that AA wanted to buy NW in 2000 but NW wanted about $100/sh when AA was willing to pay more like $60, right? Prior to TWA, AA had its sights set on NW, and AA had almost as much NRT service as it does now (from SEA instead of LAX; JFK-NRT is new).

AA may not be lusting after NW the way it did five years ago, but those 29 weekly China frequencies still look very attractive to AA.

 

[NuGuy]

Hi All,

The problem with a merger or purchase of NWA is that all of the fifth freedom rights in the Pacific, both passenger and cargo, are tied irrevocably to the NWA corprate entity AND it's certificate. It's been that way since the 1950s. This is also why NWA cannot simply sell off the Pacific like PanAm did.

If NWA as an "entity" goes away for any reason, those fifth freedom rights evaporate, and would be impossible to duplicate. This makes any merger or aquisition very, very difficult unless NWA is the "survivor".

Nu

 

[Bigsky]

The real jewel in Asia is the Chinese world which includes HKG, SIN, and to a lesser extent TPE


Sorry it's Tokyo (NRT)

 

[Whadayano]

I'm pretty sure that the NWA rights to China from NRT are tied o NRT--from the Chinese end, its the JAPANESE govt that "elects" thanks to the good guys winning WWII to have NWA fly them. NWA could NOT fly LAX-Shanghai since that would come under the US-Sino bilateral.

 

[WorldTraveler]

NuGuy,
where do you get the idea that NW's Pacific rights are tied to its corporate identity? Every US international route asset belongs to the US government who can negotiate its transfer to any airline it chooses. The US government would insist that any foreign government allow the transfer of any rights held by any US airline to any other airline. That is established aviation law and NW has no different arrangements. I agree with Wha...that NW could not unilaterally change its service pattern to begin nonstop service to the US from China without agreement by the Chinese government, who is not interested in seeing US carriers develop a superior service pattern than what they currently hold.
Singapore and Taiwan do have open skies but neither is a terribly attractive market by itself because of the remoteness of Singapore and the small size of Taiwan. SQ has the rights they do because their government recognizes their remote location and know that without having open skies, SQ would be merely a regional airline. SQ relies on alot of circuitous connections to survive; people are willing to do it because of the superior service. Taiwan is also overshadowed by mainland China and the political reality surrounding Taiwan's identity.

As for Chinese rights, NW may have more by virtue of operating a cargo division but UA actually operates more passenger services, including the only nonstops to the US west coast where traffic can be most efficiently distributed throughout the US.

It is very interesting that NW and UA could both be in play at a time when US airlines like AA, CO, and DL need access to Asia more than ever. I'd say it is very unlikely that both NW and UA will emerge from this round of industry restructuring independent and operating by themselves.

 

[eolesen]

Stranger things have happened.... Keeping the fifth freedom rights could be a simple act -- have NWA be the surviving corporate entity, but change names similar to what happened with Valujet buying Airtran, Texas International buying Continental, and America West buying US Airways.

But having beyond rights at NRT may not be as important these days.

Aside from open skies agreements making some of those route authorities widely available, you also have to remember that beyond rights at NRT (and LHR) were valuable simply because of aircraft range limitations. Now that AA and other carriers have the 777, we'd just as soon operate to China nonstop from the States and overfly NRT.

 

[FWAAA]

FormerModerAAtor would know better than I, but it looks to me like the China frequencies belonging to NW could be reallocated by NW (or by a buyer) to other USA-China routes as nonstops, if desired. NW has the option (currently exercised) to fly them as one-stops via NRT, but doesn't have to. Under the USA-China treaty, the DOT allocates the allowed frequencies among the designated airlines and selects the airlines; China isn't involved in "approving" the airlines. NW has in the past changed some of its cargo-only frequencies into combination frequencies, and nobody "asked" the Chinese for permission to do it. The US government is granted that power under the treaty, not the PRC.