The Noose tightens on Gerry

dariencc

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Airline consolidation: Which combined companies will take off?

Dawn Gilbertson
The Arizona Republic
Dec. 13, 2006 08:21 PM


The airline mating game just added more contestants.

On the heels of US Airways' bid for Delta Air Lines last month, four more airlines joined the merger mix on Wednesday.

United and Continental are in preliminary talks, according to national news reports, and AirTran Airways made an unsolicited offer for niche carrier Midwest Express. advertisement




It's uncertain whether any of the proposed pairings will materialize.

Delta is vehemently opposed to US Airways' offer, and its employees swarmed a convention center near Atlanta Wednesday to rally against it. Midwest Express politely declined AirTran's overtures Wednesday and wished the airline's CEO happy holidays. United and Continental officials declined comment.

But analysts say this much is clear: The number of players is likely to shrink.

"The cat's out of the bag," said Jim Corridore, airline analyst for Standard & Poor's, the debt-rating agency. "There's going to be some consolidation."

US Airways CEO Doug Parker has been banging the consolidation drum for a while now and took the first major step last year when he was head of America West and bought bankrupt US Airways. United's CEO, Glenn Tilton, has been similarly outspoken.

They maintain that larger airlines with a broader route network will be more competitive and better able to handle the industry's notorious ups and downs, providing more stability for employees and passengers and better returns for investors.

They also can eliminate duplicate flights and shrink their fleets, helping to raise fares. Airfares have been climbing steadily the past 18 months as airlines try to return to profitability in the face of higher fuel prices, but Parker has said there are still too many flights to keep fares where they need to be for airlines to make money.

In making his pitch for Delta, Parker has repeatedly said the US Airways-America West merger is Exhibit No. 1 in the case for consolidation. The airline has reported three consecutive quarterly profits, better than it had projected, and has forecast a profit for the fourth quarter that ends in a couple of weeks. The stock is about triple its initial offering price.

"We've obviously proven to ourselves that there's a lot of value to be created by merging airlines," Parker said the day the Delta offer was announced. "We believed this to be a unique opportunity to do it again."

Roger King, airline analyst for research firm CreditSights, said other airlines are seeing the early success of that deal "and they're going, 'Wow.' "

Everyone but Delta, that is. The airline has said repeatedly that it wants to emerge from Chapter 11 as an independent airline. It hasn't provided details of its re- structuring plan but says they should be out in the next couple of weeks. Delta officials reportedly laid out their plan for creditors, and its objections to the US Airways bid, on Wednesday, and US Airways made its second pitch to creditors.

Whether Delta can or will stick to that plan in the face of Wednesday's merger moves is the big question.

Analysts said the early advantage from the latest developments goes to US Airways.

King said Delta CEO Gerald Grinstein is "probably feeling less secure every day."

Delta's management and, especially, creditors, who hold the key cards in the airline's bankruptcy, can't ignore the changing landscape.

"It does put a little bit of pressure on them," Corridore said. "If we have carriers that are bigger and going to be getting stronger, then Delta needs to go with the times."

Another plus for US Airways: With its reported discussions with Continental, United looks to be focused on other prey, at least for now.

Parker, Corridore said, is probably "happy that United is not going to come in and take the deal away from them."

Parker, through a spokeswoman, declined to comment.

A competing bid isn't out of the question, of course. United is said to have expressed interest in Delta previously, and another S&P airline analyst said in a report Wednesday that it or Northwest still could make a move for Delta if US Airways' bid looks as if it's gaining ground.

"Running an airline just got tougher," King said. "They've had this bit of a breather this past year (with profits returning), then all of a sudden, 'Kaboom,' the atom bomb was dropped on the industry. Now these guys have got to do some serious long-term thinking. Should I be an acquirer? An acquiree? This is all very difficult stuff."
 

Flufdriver

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Airline consolidation: Mod Note- Remainder of lengthy post deleted. Please DO NOT quote a lengthy post to add a couple of lines. Thanks.

Let the Delta spin begin....I would have loved to been at the raw-raw outing today in Atlanta...I can just imagine all the BS that was flying simply to scare a mass of people, most of which DON'T know the facts...Moaks included!!

Tic...Toc...Tic...Toc
 

Itestwell

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Let the Delta spin begin....I would have loved to been at the raw-raw outing today in Atlanta...I can just imagine all the BS that was flying simply to scare a mass of people, most of which DON'T know the facts...Moaks included!!

Tic...Toc...Tic...Toc
People do not know the facts, and are scared senseless, hence the rally. Hand them a "button", and they spin into a panic that is unreal. Fear, and how people react, is a very interesting thing. After all, it keeps these boards going! ;) It gives me a good chuckle, tho, and laughter is the best medicine! :lol:
 

USA320Pilot

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In my opinion, the biggest risk for Delta employees is a Pan Am style liquidation or fragmentation of Delta. If the employees scream loud enough, with "merger mania" apparently now abundant within the industry, US Airways and/or another company may make a public bid for Delta's assets to be split among a number of companies without employees.

If I was a Delta employee, I would be careful for what I wished for.

Regards,

USA320Pilot
 
In my opinion the biggest risk to Delta employees is an unsolicited take over bid from a boy wonder airline CEO who still hasn't cleared the decks from the last merger and is now aiming to take on another and bigger challenge.


You're going to have to earn the left seat in a 777 or a 764.Dougie can't buy it for you...
 

abe

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In my opinion, the biggest risk for Delta employees is a Pan Am style liquidation or fragmentation of Delta. If the employees scream loud enough, with "merger mania" apparently now abundant within the industry, US Airways and/or another company may make a public bid for Delta's assets to be split among a number of companies without employees.

If I was a Delta employee, I would be careful for what I wished for.

Regards,

USA320Pilot

This is about the 100th time you've posted this drivel, USA320.

Before I call Jerry and tell him to "sell now, we're DOOOOOOMMMMED...there's no hope unless you sell NOW!", let's take a few moments and think this thing though.

What you are saying is that the creditor's committee, the BK judge and/or the government turns Parker's deal down....then, a few months later decides to sell the parts off?

That is quite a stretch, my friend. You are either assuming that Parker's deal is a way low-ball offer (which you have already stated otherwise), or that the creditors are all a bunch of buffoons!

You are saying that the creditors (Boeing, Pratt, PBGC, Delta pilots, to name some of the bigs ones) will decide, after passing on Parker's offer, that they will benefit more from a total dismantling of the Delta network?? Please describe for us all how Boeing, in particular (the key creditor according to you in other posts) would benefit in the future from this action?

As BoeingBoy has pointed out more than once, the Pan Am situation doesn't even begin to compare to Delta's.

If your intention is to flamebait with these statements....well, that's fine. There's plenty of that on here from both sides of this deal.



Abe
Keeping it real...
 

michael707767

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I think UAL and CAL are in talks as a purely defensive manuever. If USAir/DL gets stopped they will back off and stay solo. Further, I think the government will take a look at what the industry will be if US/DL, UAL/CAL, and then inevitably AA/NW merge. That will be bad for the consumer and no way will the government allow the industry to consolidate down to three majors.
 
B

BottomFeeder

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Please describe for us all how Boeing, in particular (the key creditor according to you in other posts) would benefit in the future from this action?

Abe
Keeping it real...


abe

Simple matter to resolve. Delta is offering less money and a bigger loss to Boeing in this bankruptcy. Usairways is offering a higher amount or less loss.

Aircraft will be bought and since neither Boeing or Airbus can provide all the industry needs. Therefore both suppliers are needed and will remain. Boeing will still sell aircraft regardless of what happen to Delta.
 

abe

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abe

Simple matter to resolve. Delta is offering less money and a bigger loss to Boeing in this bankruptcy. Usairways is offering a higher amount or less loss.

Aircraft will be bought and since neither Boeing or Airbus can provide all the industry needs. Therefore both suppliers are needed and will remain. Boeing will still sell aircraft regardless of what happen to Delta.

Your first paragraph is a valid argument of why this deal will go through (it's an argument that I don't agree with, but at least it's valid). Let's not forget though that Jerry/Delta has been a Boeing-only customer for years, and recently signed a deal worth many millions for future firm orders. Parker/USAirways are big time Airbus customers and had huge help from the French with merger #1, if I'm not mistaken:

http://www.sltrib.com/business/ci_4709403


Your second paragraph doesn't make sense to me. Boeing is in the business of selling airplanes. Why would they decide on one hand to turn down an offer that keeps one of their biggest customers in business (Parker's plan), but then a few months or weeks later, decide it's best to dissolve that same customer?

I'm not following the logic here....

Abe
 

USA320Pilot

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My cooments have nothing to do with "flame bait". My comments are simply thoughts from "informed people" who are speculating on a way to do away with Delta employee resistance to industry consolidation.

interestingly, Delta employees prospered at the expense of the Pan Am fragmentation of a bankrupt airline and now they believe the same thing cannot happen to them.

The issue is simple: If the creditors believe the proposed merger or break up of Delta provides more value and the employees are an impediment to the process than a solution, which would alos help antitrust issues, then a break up of Delta could happen with multiple companies obtainin Delta assests.

Regards,

USA320Pilot
 

hp_fa

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My cooments have nothing to do with "flame bait". My comments are simply thoughts from "informed people" who are speculating on a way to do away with Delta employee resistance to industry consolidation.

"Informed people" are passengers getting off his shuttle flights.

My advice to the DL folks on this forum is to ignore him. He has a long history of rabble rousing and showing off his massive ego.

As to why I despise him so much, let's just say it is a combination of not letting pompous windbags get away with their drivel and not having any tolerance for bullies.

Ask him about all his ICT/UCT posts over the years. Better yet, if you have the time, go back and read a lot of his posts regarding United, his own union and a letter he wrote to a Charlotte newspaper a few years ago.
 

abe

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interestingly, Delta employees prospered at the expense of the Pan Am fragmentation of a bankrupt airline and now they believe the same thing cannot happen to them.

You mean the deal where Ron Allen paid way too much, and got way too little (no SA or Asia routes)?

The deal that brought loads of debt, airplanes that are no longer even on the property, and dozens of routes that Delta no longer even operates?

The "prosperous" deal that helped Delta lose big money in the mid-90's and contributed to the furlough of thousands of Delta employees!

Is that the prosperous deal to which you are referring??




The issue is simple: If the creditors believe the proposed merger or break up of Delta provides more value and the employees are an impediment to the process than a solution, which would alos help antitrust issues, then a break up of Delta could happen with multiple companies obtainin Delta assests.

Regards,

USA320Pilot[/font]


I thought you told us that the Delta employees have no power in this thing...which is it? (maybe the rally was worthwhile after all!)

Let's switch gears for a second. Pretend you are Boeing. One of your biggest customers (with hundreds of millions of dollars of future business already on the books) is the target of a hostile takeover by a carrier with huge ties to your biggest competitor.

And, lucky for you, you have a vote and can help decide if it happens or doesn't happen. Which way are you gonna vote, USA320?


Abe
 

NYCDelta

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Dec 12, 2006
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Let's switch gears for a second. Pretend you are Boeing. One of your biggest customers (with hundreds of millions of dollars of future business already on the books) is the target of a hostile takeover by a carrier with huge ties to your biggest competitor.

And, lucky for you, you have a vote and can help decide if it happens or doesn't happen. Which way are you gonna vote, USA320?


Abe

Very good point and very well-stated.
 

luv2fly

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Chip,

You do realize that even if this deal goes through you are going to get fenced from bidding that 767 captain slot you're salivating over don't you? :)