BREAKING: United and Delta in Merger Talks

[Matt Molnar]

Official: United, Delta Mull Combination (http://www.breitbart.com/article.php?id=D8STL6L00&show_article=1)

By HARRY R. WEBER
AP Business Writer

ATLANTA (AP) - UAL Corp.'s United Airlines and Delta Air Lines Inc. have been discussing a combination between the nation's second- and third- largest carriers that would keep the United name and the corporate headquarters in Chicago, The Associated Press has learned.

Shares of both airlines surged on the news.

There is a sense of urgency in the talks, which have been going on for some time and continued as recently as a week or so ago, an official with knowledge of the talks said Wednesday. The official spoke on condition of anonymity because the person was not authorized to speak publicly. Read More... (http://www.breitbart.com/article.php?id=D8STL6L00&show_article=1)

[Matt Molnar]

Cliffs Notes:

• United name would be retained, "Delta" would be no more
• HQ would be in Chicago, ATL would be main hub
• They want to pull this off before a new administration takes office to ease regulatory hurdles

[adam613]

Interesting.

United operates pretty much every aircraft type that Delta operates, so that transition would be fairly straightforward. For the most part, the two airlines serve different parts of the market; Delta has a bigger presence in Europe and United has a bigger presence in Asia, and they can maintain domestic service from the existing hubs.

Except for DEN and SLC, which are too close to each other to serve as discrete hubs for the same airline. This presents an interesting question. DEN is a better hub location than SLC, but United is getting its ass kicked by Southwest in DEN...either the new superairline could try to compete there, or leave DEN to the low-cost carriers and focus on SLC.

It's not a combination I would have expected, but I could certainly imagine worse...like United and USAir...

(I guess that means I have to get out there and catch those &$%^&$ Habitat and Pink Delta ASAP...)

[Matt Molnar]

Delta denies merger talks with UAL (http://www.reuters.com/article/businessNews/idUSWEN258820071114?feedType=RSS&feedName=businessNews&rpc=23&sp=true)

Wed Nov 14, 2007 3:47pm EST

NEW YORK (Reuters) - Delta Air Lines Inc (DAL.N: Quote, Profile, Research) said on Wednesday that there were no ongoing talks to merge with United Airlines parent UAL Corp (UAUA.O: Quote, Profile, Research).

"There have been no talks with United regarding any type of consolidation transaction and there are no such ongoing discussions," Chief Executive Richard Anderson said in a statement.

Earlier on Wednesday, the Associated Press had reported that the United and Delta were discussing a possible deal.

[Matt Molnar]

The rumor comes on the heels of today's letter to the airlines from a hedge fund that owns substantial stakes in both.

Financial Times:

Hedge fund urges Delta and United to merge (http://www.ft.com/cms/s/0/6451cf9e-92de-11dc-ad39-0000779fd2ac.html)

By Justin Baer in New York

Published: November 14 2007 18:37 | Last updated: November 14 2007 18:37

A large shareholder in both Delta Air Lines and United Airlines on Wednesday urged the two companies to merge, a transaction that would create the largest domestic carrier.

Pardus Capital Management, a New York-based hedge fund with more than 2 per cent of Delta, the third-biggest US carrier, and a 4.8 per cent stake in UAL, corporate parent to second-ranked United, argues the merger would represent the best possible combination of large US airlines.

Record fuel prices, high labour costs and excess capacity on many routes have led several airline chief executives, including Delta’s Richard Anderson and United’s Glen Tilton, to acknowledge the cost savings consolidation would bring about. For investors mindful of the airlines’ history of wilting in times of economic weakness, the mergers can’t come soon enough. Read More... (http://www.ft.com/cms/s/0/6451cf9e-92de-11dc-ad39-0000779fd2ac.html)

[Nonstop2AUH]

Wouldn't surprise me if the hedge fund planted this story with the AP to draw attention to its letter and to create some action in the stocks (anyone remember "Blue Horseshoe loves Blue Star Airlines?"). Hedge funds are known to spread rumors to facilitate their short term trading profits. The idea is you establish a stake in a company that is or has recently been in turmoil, create some buzz about it that gets the stock going, then you scream that they aren't maximizing shareholder value and you're going to dump your stake all at once unless management does what you want them to.

Did some quick research on Pardus and they have no record as a long term investor in anything and I doubt they are particularly interested in the future of the airline industry, they just want to make some money on the consolidation. They are currently doing the same thing with auto parts makers Visteon and Valeo, where they bought a stake in each then started pushing them to merge. I suspect Karim Samii is more Gordon Gekko than Warren Buffett. Anyway this seems to be the standard hedge fund operation although it's significant that he claims to have Gordon Bethune as an advisor, who has been saying for years that America has too many airlines.

[cancidas]

here's hoping they keep the mad dogs around and get rid of those scarebusses!!

[T-Bird76]

This is FAR from a straight forward merger....... Any combination of UAL and DAL would be a logistic nightmare and would not be of any benefit to the traveling public. Cities with service from both carriers would lose service, small communities would lose service, and there would be less choice in the market driving up fares. The only benefit would be to the lawyers, top brass, analysts, and shareholders.

You can be sure IAD would shutter or be greatly reduced, SLC or DEN would be dehubbed. Dual job roles would be eliminated resulting in thousands of people losing their job. The unions would also be a joy to deal with...

[Nonstop2AUH]

I think Tommy is spot on here. The only real winner in this is Karim Samii & friends who will likely be long gone with their money when the labor and other integration issues have to be dealt with. The hedge fund will have made a quick buck and moved on, while what the rest of us will get is less competition and higher fares for the public, and less jobs and lower pay for the employees. Now, there are obviously viable consolidation opportunities in the industry but I don't think they are likely to be between any 2 of the 3 largest carriers; I suspect there would be serious federal as well as local political objections to this sort of thing. Would suspect that the combination of one of the big 3 with a name from the next tier (e.g. DL and NW, UA and US, etc.) would be more acceptable all around. But remember folks, even Bob Crandall said he'd never invest in an airline stock!

[nwafan20]

People, it's not really "breaking news" the media just got a hold of information that they are talking. All airlines are talking to each other, it's not a big deal... Remember like 6 months ago when it was breaking news that Delta was talking to Northwest? Yeah.... just talk.

[PHL Approach]

This one was put to rest already

http://www.reuters.com/article/marketsN ... 114?rpc=44 (http://www.reuters.com/article/marketsNews/idUKWEN258820071114?rpc=44)

[Matt Molnar]

Interestingly, it was exactly a year ago today that US submitted a takeover offer for Delta. We all know how that turned out.

[nwafan20]

I think it is stupid how everyone got worked up on just a rumor...

[PhilDernerJr]

The news got worked up. i read several news articles that were reported it as if it were a done deal.