Is This Merger Possible?
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jimntx
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Delta and Northwest would be more likely. Each has strengths in the International markets where the other is weak. There would not be a lot of route system overlap. A/C compatability might be a problem, but that would be true for almost any airline merger.
Given the size of Delta and United, I think there would be major anti-trust issues with the government.
Given the size of Delta and United, I think there would be major anti-trust issues with the government.
firstamendment
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I agree with you Jim. Also, I think there would have to be a major downsize of both UAL and DAL before this baby would get off the ground.
If any compass to this situation, US East is having to put down about 60 aircraft, returning the aircraft to GE as a part of their reorganization and now merger with AWA. I think if a DAL/UAL merge or DAL/NWA merge were to come about, I would estimate DAL would probably have to put down no less than 100 a/c and the merged company about the same. I'm only basing this on relative size to US Airways.
Just my thoughts. I could be wrong. I just think part of the restructuring today is aircraft rightsizing and I can't see the carriers rumored to merge keeping that many in the air. But, who knows.
RowUnderDCA
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I think that any anti trust trouble with any merger of two big six will be pretty easily overcome. It's a new world.
With the exception of AMR/CAL UAL/NWA LCC/DAL
All others, even the least likely, could be induced by the hooking up of the most likely.
Let's say DAL/NW could inspire CO/UA and AMR/US
Yes, US might get rid of PHL... but the motivation to do so might be sufficient.
The same with US/CAL.
Although I don't think that is likely.
I still say UA/CO DL/AMR US/NW
I understand the size of these mergers, but they'd all come with some reduction of fleet. In the case of DL/AMR obviously JFK becomes a question, but I think some modest reductions in trans atlantic... or even some radical restructuring that might take care of BA/AA antitrust immunity problems could present itself.
In any case, I think the UA/UA concerns are not going to be the same with legacy mergers to come from the govs perspective
With the exception of AMR/CAL UAL/NWA LCC/DAL
All others, even the least likely, could be induced by the hooking up of the most likely.
Let's say DAL/NW could inspire CO/UA and AMR/US
Yes, US might get rid of PHL... but the motivation to do so might be sufficient.
The same with US/CAL.
Although I don't think that is likely.
I still say UA/CO DL/AMR US/NW
I understand the size of these mergers, but they'd all come with some reduction of fleet. In the case of DL/AMR obviously JFK becomes a question, but I think some modest reductions in trans atlantic... or even some radical restructuring that might take care of BA/AA antitrust immunity problems could present itself.
In any case, I think the UA/UA concerns are not going to be the same with legacy mergers to come from the govs perspective
WorldTraveler
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Although I have believed DL/NW was inevitable, I'm not so sure that NW will successfully restructure to be a viable partner. They are having to almost exclusively cut costs in order to restructure instead of also increase revenues through network restructurings as US, UA, and now DL are doing. NW's strategy appears to be to dramatically reduce their costs which will come at the cost of their service levels. Further, other US airlines are growing into NW's Asian markets while NW is forced with using their few new aircraft deliveries to replace gas guzzlers that other airlines grounded a decade or more ago.
Even if NW does successfully restructure, they will be a bottom feeder and not likely to be a long-term player. AA is clearly the carrier that would benefit the most by acquiring NW's Asian rights while dismantling or shrinking much of the rest of NW's operation. Given that most of NW's employees will be outsourced, there is very little incentive to try to keep the operation at the same size as it is today.
I do believe that UA and DL will both restructure successfully although I do believe that UA will be very vulnerable because its costs post-bankruptcy will still be at the high end of the industry average - not a good place for a "new" business to be. Other carriers are certain to pounce on UA as soon as they emerge from BK - and WN isn't even waiting. Also, DL and UA have very little overlap so DOJ considers are muted. In fact, the DL/CO/NW codeshare is bigger than DL/UA even though the codeshare does not accomplish the same thing as a merger.
DL's long-term survival depends on whether it can come out of BK quickly and prove that it is capable of playing in the new environment. Given their business plan, they are aggressively planning to get there. If they establish themselves as having done what's necessary to survive and done it better than most other airlines, they could be an acquirer.
I also think CO is probably most likely to remain alone if they do not find the right merger partner. UA certainly looks attractive to them but UA is still a large airline with lots of obligations and fairly high costs. Reworking UA again to make it work w/ CO is not necessarily an easy process. And all of UA's current creditors will expect to be paid for the investment they are making in turning UA around. UA won't be cheap to acquire unless they start to slide and their restructuring proves insufficient in a couple years. At that point, DL could be as well positioned to acquire UA as CO, whose balance sheet is stressed and only getting moreso and whose costs are also moving toward the top of the industry while facing new low cost carrier competition.
Conversely, UA's new owners are going to be very reluctant to allow UA to buy anything unless it is pretty certain the other carrier can be easily integrated into UA - which begs the question of why that carrier and its creditors would choose to sell itself.
AA is clearly the best positioned and will continue to do what's necessary to remain in control of its financial situation. After that, it's hard to predict too far down the road but I am more comfortable in saying that DL will be a long-term survivor or will be acquired in a pretty healthy form. UA can be the same but it has to get its costs down lower since DL and NW will both aggressively lower their costs in BK. The new U could be an acquirer of NW but probably only if NW falls dramatically at which point AA probalby has a greater ability to acquire them. CO is a likely survivor but they do not have the financial resources of AA to acquire so anyone they merge with will have to be pretty healthy coming into a merger as a result of bankruptcy - at which point there is little incentive for the other airline to sell.
So, I predict that NW will not survive long-term but I'm not sure anyone can be certain how the rest of the pack will shake out. Foreign ownership could change the outcome but I still think US laws will favor a domestic merger if that is in the best interest of US airlines. I believe as a country we have to give US airlines first opportunity to merge if that is best for both airlines before we open US airlines up to foreign ownership, which probably will only prolong excess capacity in the domestic marketplace.
Even if NW does successfully restructure, they will be a bottom feeder and not likely to be a long-term player. AA is clearly the carrier that would benefit the most by acquiring NW's Asian rights while dismantling or shrinking much of the rest of NW's operation. Given that most of NW's employees will be outsourced, there is very little incentive to try to keep the operation at the same size as it is today.
I do believe that UA and DL will both restructure successfully although I do believe that UA will be very vulnerable because its costs post-bankruptcy will still be at the high end of the industry average - not a good place for a "new" business to be. Other carriers are certain to pounce on UA as soon as they emerge from BK - and WN isn't even waiting. Also, DL and UA have very little overlap so DOJ considers are muted. In fact, the DL/CO/NW codeshare is bigger than DL/UA even though the codeshare does not accomplish the same thing as a merger.
DL's long-term survival depends on whether it can come out of BK quickly and prove that it is capable of playing in the new environment. Given their business plan, they are aggressively planning to get there. If they establish themselves as having done what's necessary to survive and done it better than most other airlines, they could be an acquirer.
I also think CO is probably most likely to remain alone if they do not find the right merger partner. UA certainly looks attractive to them but UA is still a large airline with lots of obligations and fairly high costs. Reworking UA again to make it work w/ CO is not necessarily an easy process. And all of UA's current creditors will expect to be paid for the investment they are making in turning UA around. UA won't be cheap to acquire unless they start to slide and their restructuring proves insufficient in a couple years. At that point, DL could be as well positioned to acquire UA as CO, whose balance sheet is stressed and only getting moreso and whose costs are also moving toward the top of the industry while facing new low cost carrier competition.
Conversely, UA's new owners are going to be very reluctant to allow UA to buy anything unless it is pretty certain the other carrier can be easily integrated into UA - which begs the question of why that carrier and its creditors would choose to sell itself.
AA is clearly the best positioned and will continue to do what's necessary to remain in control of its financial situation. After that, it's hard to predict too far down the road but I am more comfortable in saying that DL will be a long-term survivor or will be acquired in a pretty healthy form. UA can be the same but it has to get its costs down lower since DL and NW will both aggressively lower their costs in BK. The new U could be an acquirer of NW but probably only if NW falls dramatically at which point AA probalby has a greater ability to acquire them. CO is a likely survivor but they do not have the financial resources of AA to acquire so anyone they merge with will have to be pretty healthy coming into a merger as a result of bankruptcy - at which point there is little incentive for the other airline to sell.
So, I predict that NW will not survive long-term but I'm not sure anyone can be certain how the rest of the pack will shake out. Foreign ownership could change the outcome but I still think US laws will favor a domestic merger if that is in the best interest of US airlines. I believe as a country we have to give US airlines first opportunity to merge if that is best for both airlines before we open US airlines up to foreign ownership, which probably will only prolong excess capacity in the domestic marketplace.
jimntx
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I was told by a passenger the other day that an article in WSJ mentioned AMR as a potential purchaser of NW. I would think that they would want to stay out of it unless NWA converts to Ch. 7 (unlikely in the short term) and their Asian routes become available.
If that happens Katy bar the door at the auction. Not only would AMR be bidding high for the route authorities, I would guess that they would also be bidding on the available a/c--even if it meant returning the 747 or the MD-11 to the fleet temporarily.
If that happens Katy bar the door at the auction. Not only would AMR be bidding high for the route authorities, I would guess that they would also be bidding on the available a/c--even if it meant returning the 747 or the MD-11 to the fleet temporarily.
WorldTraveler
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Probably the 744s. And AA would probably take the Airbuses even if they don't necessarily want them. The A320s are cheaper to operate than the Super 80s (although I've been hearing rumors about a reengining program for the MD80 that would benefit AA and DL). The A330 is more than adequate for most of the AA's European flights which would free up 777s for the Pacific. Regardless of whether AA likes them, it probably is not possible to make a deal for NW assets even in C7 w/o taking a number of the Airbuses.
Another thought from above.... DL, CO, and AA can likely not be combined because of their significant overlap in the NE, esp. NYC. DL is only increasing the overlap w/ CO w/ its international expansion while CO and AA obviously duplicate each other in Texas and to Latin America w/ DL to a smaller but still significant degree. I point this out only because CO/DL was an option at one time but no longer is. Therefore, CO and DL's only real partners are NW and UA. I think DL and CO will both be very reluctant to merge w/ NW which but AA would have much less concern about doing so. I think AA would prefer a C7 but could easily do it w/o and then pull down what's not needed fairly quickly. There is some alliance strategic value to AA going after NW since it would help to weaken Skyteam at a time when oneworld will be trying to make up for lost time over the Atlantic as AA/BA will could soon get antitrust immunity as well as new competitors into London.
CO also could very easily remain a standalone or merge w/ a west coast airline such as Alaska. DL will continue to own the SE, though, and CO will have a hole there but so will everyone else except for US and AirTran.
Another thought from above.... DL, CO, and AA can likely not be combined because of their significant overlap in the NE, esp. NYC. DL is only increasing the overlap w/ CO w/ its international expansion while CO and AA obviously duplicate each other in Texas and to Latin America w/ DL to a smaller but still significant degree. I point this out only because CO/DL was an option at one time but no longer is. Therefore, CO and DL's only real partners are NW and UA. I think DL and CO will both be very reluctant to merge w/ NW which but AA would have much less concern about doing so. I think AA would prefer a C7 but could easily do it w/o and then pull down what's not needed fairly quickly. There is some alliance strategic value to AA going after NW since it would help to weaken Skyteam at a time when oneworld will be trying to make up for lost time over the Atlantic as AA/BA will could soon get antitrust immunity as well as new competitors into London.
CO also could very easily remain a standalone or merge w/ a west coast airline such as Alaska. DL will continue to own the SE, though, and CO will have a hole there but so will everyone else except for US and AirTran.
firstamendment
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Oh what the heck. I'm throwing in a new prediction. I think Alaska will merge with the new US Airways. That would span the US network to all 4 regions of the country with the exception of the middle. Frontier? Just my thoughts.
jimntx
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I doubt an US Airways-Alaska combo. Why would Alaska want to give up a VERY lucrative codeshare with AA's worldwide system? There are rumors, by the way, that Alaska may merge with/be bought by AA.
CruelSummer
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Is this just something you made up as a possibility? Or is there any truth to it?
Welcome to the boards Cruel.
Everything you read here is "made up". If we actually had insider information, we'd all be hanging out with Martha with ankle locators keeping track of us. Everyone here spins it the best way for their particular airline of choice. We have a couple posters who try to make you think they actually have a clue, but don't be fooled, they are winging it too. (ahem, usa320 and worldtrav)
So sit down and chug some koolaid. Fun board but totally full of piss and vinegar.
Everything you read here is "made up". If we actually had insider information, we'd all be hanging out with Martha with ankle locators keeping track of us. Everyone here spins it the best way for their particular airline of choice. We have a couple posters who try to make you think they actually have a clue, but don't be fooled, they are winging it too. (ahem, usa320 and worldtrav)
So sit down and chug some koolaid. Fun board but totally full of piss and vinegar.
CruelSummer
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Thanks, Fly... great advice!!
firstamendment
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We are all airline analyst wannabees. That's the fun of it all. I predicted the US/AWA way back...all though nobody remembers and I have no patience to begin to find those old files...and everyone said it would never happen....CAL was involved...different engines..Now with AA...their "worldwide system"..whatever..just having fun here.
Piss and vinegar? Look no further than from the one who wrote that one. 😉
