CNN In the Money

[UPNAWAY]

Just on, one of the best stories I have seen so far.
Highlights:
10 Years ago Delta was the Best Airline in the world the about 6 years ago he said something happened and they are now a dog with flees.
He would rather have Doug Parker & Scott Kirby running Delta far more than anyone currently at Delta.
He thinks the offer is way to good to turn down and the marlets seems to agree, US stock up big, Delta debt up 40%!
He thinks CLT will be the hub to be reduced freeing up lots of gates for SWA, JBLU and ATA which will get things past the DOJ and will also be a big boon for that city.
When talking about "why" he said East Coast & Europe, that US basicaly has no international pressence (That kinda counters what all the US people told all the AWA people which was "Now you work for a big International carrier").
The more I look at this the more I think it will happen. The markets and big money people like it, nobody seems to have much faith in current Delta managment. If Delta managment hasn't gotten behind this things will get real interesting in mid Feb when the BK exclusetivity runs out.

 

[RowUnderDCA]

Just on, one of the best stories I have seen so far.
Highlights:
10 Years ago Delta was the Best Airline in the world the about 6 years ago he said something happened and they are now a dog with flees.
He would rather have Doug Parker & Scott Kirby running Delta far more than anyone currently at Delta.
He thinks the offer is way to good to turn down and the marlets seems to agree, US stock up big, Delta debt up 40%!
He thinks CLT will be the hub to be reduced freeing up lots of gates for SWA, JBLU and ATA which will get things past the DOJ and will also be a big boon for that city.
When talking about "why" he said East Coast & Europe, that US basicaly has no international pressence (That kinda counters what all the US people told all the AWA people which was "Now you work for a big International carrier").
The more I look at this the more I think it will happen. The markets and big money people like it, nobody seems to have much faith in current Delta managment. If Delta managment hasn't gotten behind this things will get real interesting in mid Feb when the BK exclusetivity runs out.

Putting aside current plans and routemaps. If this deal goes through the combined airline will be all but out of concourse B at CLT.... or at least down 10 to 20 gates.

 

[brokenwrench]

Putting aside current plans and routemaps. If this deal goes through the combined airline will be all but out of concourse B at CLT.... or at least down 10 to 20 gates.

If this deal goes thru you can put the CLT hub "aside."
Look to gates at CLT be given up to ATA, SWA and JetBlue to appease antitrust concerns.

 

[hp_fa]

The more I look at this the more I think it will happen. The markets and big money people like it, nobody seems to have much faith in current Delta managment. If Delta managment hasn't gotten behind this things will get real interesting in mid Feb when the BK exclusetivity runs out.

The beauty of (or problem with) Parker's move is that under his offer the creditors get more money then the what it seems they would get from Delta under the current plan. So now Delta is in a box. They can:

1. keep going the way they are and hope that the creditors approve their future plan;

2. negotiate with LCC; or,

3. improve their payout to creditors which will have the effect of causing more debt to the airline upon exiting Chapter 11.

If Delta thinks that it's creditors will accept less money and approve their plan they are likely mistaken. Those businesses have their own bills to pay and, if a public company, have a fiduciary responsibility to their shareholders to maximize profits and/or lessen losses. If Delta improves their expected offer, they will be weakened by the higher debt and impaired credit they will be carrying.

My guess is that Delta, no matter what it does, is wishing that Mullen and Grinstein had treated Parker better when they had their chances.

(BTW, I do not work for LCC, nor own stock, so I have no personal interest in how this gets resolved.)

 

[mistified]

If this deal goes thru you can put the CLT hub "aside."
Look to gates at CLT be given up to ATA, SWA and JetBlue to appease antitrust concerns.

Good point.
Delta may be screwed either way.
Bummer 🙁

The beauty of (or problem with) Parker's move is that under his offer the creditors get more money then the what it seems they would get from Delta under the current plan. So now Delta is in a box. They can:

1. keep going the way they are and hope that the creditors approve their future plan;

2. negotiate with LCC; or,

3. improve their payout to creditors which will have the effect of causing more debt to the airline upon exiting Chapter 11.

If Delta thinks that it's creditors will accept less money and approve their plan they are likely mistaken. Those businesses have their own bills to pay and, if a public company, have a fiduciary responsibility to their shareholders to maximize profits and/or lessen losses. If Delta improves their expected offer, they will be weakened by the higher debt and impaired credit they will be carrying.

My guess is that Delta, no matter what it does, is wishing that Mullen and Grinstein had treated Parker better when they had their chances.

(BTW, I do not work for LCC, nor own stock, so I have no personal interest in how this gets resolved.)

Sorry I meant to respond to the above post.
Good points.
Delta may be screwed either way.
Bummer 🙁

 

[Itestwell]

Good point.
Delta may be screwed either way.
Bummer 🙁
Sorry I meant to respond to the above post.
Good points.
Delta may be screwed either way.
Bummer 🙁

Dont understand why DL would be "screwed" if we merge? Stronger route network, larger market share, better ability to compete. Sure, integration would be a tad bumpy ( ), but I just cant understand the extreme opposition simply because this was announced. Competition within USA is fierce, anything to make that stronger would add job stability and future profitability, no?

 

[UPNAWAY]

"Dont understand why DL would be "screwed" if we merge?"

Yea we are hearing a lot of hand ringing from the Delta faithful, but Delta comes out of this better not worse, I see no down side for Delta or it's employees (even ATL) other than the uncertianty aspects. This would be one kick ass airline, potentially! With ATL & PHL as it's largest Hubs, CLT & PHX as just smaller hubs and focus cities of LAS, LAX, CVG, PIT and NY areas.

 

[X-U]

Has everyone forgotten what happened the last time an East coast carrier tried to merge with a West coast carrier, followed quickly by an attempt to add a Southern carrier???

 

[Itestwell]

Has everyone forgotten what happened the last time an East coast carrier tried to merge with a West coast carrier, followed quickly by an attempt to add a Southern carrier???

Moot point. Totally different management, with an actual plan that adds value, as opposed to the management team that was in a race to be the "biggest" as fast as possible. No research on the different cultures, different operating styles, was done with regards to US/PSA/PI. Apples and oranges.

Listen to what DP and the creditors have to say, and then make your decision.

 

[DLFlyer31]

Totally different management, with an actual plan that adds value, as opposed to the management team that was in a race to be the "biggest" as fast as possible.

Actually, DP's goal is to become the "biggest" as fast as possible. The analogy to past mergers is very appropriate.

As for why DL people are wringing their hands, I can see a few reasons:

1) This merger creates overlapping hubs that over time will cannabalize each other....which means job losses or transfers for both DL and US employees.

2) The employee cultures will not mesh well which will create lots of tension and strife.

3) The incompatible fleets, res systems, etc will drive up costs....which means employee groups will pay in the long-run.

4) Two very different customer service cultures. US management wants to creat a mega-low cost, low service carrier. DL's management and employees are aiming at becoming a higher-end elite global carrier (though DL still has a long way to reach that).

Not a particularly pleasant experience if you're a DL employee.

 

[mistified]

Dont understand why DL would be "screwed" if we merge? Stronger route network, larger market share, better ability to compete. Sure, integration would be a tad bumpy ( ), but I just cant understand the extreme opposition simply because this was announced. Competition within USA is fierce, anything to make that stronger would add job stability and future profitability, no?

Loss of control by DAL management and employees to USAir management. The combined operation would be straped with a huge amount of debt and a very unhappy work force.
All mainly for the benifit of a few investment bankers and creditors?
Other than that smooth sailing.

 

[RowUnderDCA]

The beauty of (or problem with) Parker's move is that under his offer the creditors get more money then the what it seems they would get from Delta under the current plan. So now Delta is in a box. They can:

1. keep going the way they are and hope that the creditors approve their future plan;

2. negotiate with LCC; or,

3. improve their payout to creditors which will have the effect of causing more debt to the airline upon exiting Chapter 11.

If Delta thinks that it's creditors will accept less money and approve their plan they are likely mistaken. Those businesses have their own bills to pay and, if a public company, have a fiduciary responsibility to their shareholders to maximize profits and/or lessen losses. If Delta improves their expected offer, they will be weakened by the higher debt and impaired credit they will be carrying.

My guess is that Delta, no matter what it does, is wishing that Mullen and Grinstein had treated Parker better when they had their chances.

(BTW, I do not work for LCC, nor own stock, so I have no personal interest in how this gets resolved.)

4. A SMALLER DELTA.

Your analysis is correct, but I think there won't be more debt, there'll be fewer aircraft chasing fewer less profitable routes to up the operating margin.

Look Parker wants to compete in an east coast and TA with less hubbing capacity. He'd rather do it with an opportunity to do so from a position of potentially higher yield. Either way, he's more likely to get less capacity on the east coast and TA and maybe with a better market presence than LCC has.

 

[brokenwrench]

Moot point. Totally different management, with an actual plan that adds value, as opposed to the management team that was in a race to be the "biggest" as fast as possible. No research on the different cultures, different operating styles, was done with regards to US/PSA/PI. Apples and oranges.

Listen to what DP and the creditors have to say, and then make your decision.

DP has done a heroic job of keeping two airlines from going under (with a lot of help from the US taxpayer). He is to be commended for it. However he has NOT merged US/HP yet and has NOT demonstrated that he is interested in actually running an airlne.

Until that happens I do not think the DL folks will be very excited about this merger. DP has the US folks excited about moving to the higher pay rates! They should be asking themselves, why a carrier in BK has a higher pay rate then theres. DL folks are no doubt asking what is in it for them.

 

[TechBoy]

4. A SMALLER DELTA.

Your analysis is correct, but I think there won't be more debt, there'll be fewer aircraft chasing fewer less profitable routes to up the operating margin.

Look Parker wants to compete in an east coast and TA with less hubbing capacity. He'd rather do it with an opportunity to do so from a position of potentially higher yield. Either way, he's more likely to get less capacity on the east coast and TA and maybe with a better market presence than LCC has.

Indeed. All plans end up with a smaller Delta. US will shrink DL by 10%. Any white knight will do the same or more. And to end up independent, DL management will need to shrink to project better operating results.

I predict that DL management will come out with a new restructuring plan in the next few months that rejects more leases -- a bunch of RJs, a moderate number of MD80s and more than a few 767s. Plus there will be some very rosy forecasts of yields in those new European markets.

 

[FlyUs]

"Dont understand why DL would be "screwed" if we merge?"

Yea we are hearing a lot of hand ringing from the Delta faithful, but Delta comes out of this better not worse, I see no down side for Delta or it's employees (even ATL) other than the uncertianty aspects. This would be one kick ass airline, potentially! With ATL & PHL as it's largest Hubs, CLT & PHX as just smaller hubs and focus cities of LAS, LAX, CVG, PIT and NY areas.

Don't forget Boston. If that happens, the New Delta would carry 1 out of every 3 passengers. Massport is concerned about where/how the 2 carriers will combine. Maybe international flights will get started there.