Delta in Merger Talks with United, Northwest

Wall Street Journal:

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Delta Aims for Swift Merger With Northwest or United
By PAULO PRADA, SUSAN CAREY and DENNIS K. BERMAN
January 15, 2008; Page A8

Delta Air Lines Inc. has opened merger negotiations with both UAL Corp.'s United Airlines and Northwest Airlines Corp., and hopes to negotiate a merger agreement with one of the airlines over the next two weeks, according to people familiar with the situation.

Delta's board gave permission to Chief Executive Richard Anderson on Friday to begin simultaneous talks with both carriers, those people said. Either scenario would create the largest airline in the U.S. Read more...(subscription required)

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Muahahahahaha!

I've always said it's ugly on the 767, but the new DL scheme looks good on many other aircraft, 744 included.

I really hope that if DL did acquire Airbus family in a merger, that they'd dump them and stick to Boeing.

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Originally Posted by Phil D.

I really hope that if DL did acquire Airbus family in a merger, that they'd dump them and stick to Boeing.

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Agreed.


So if DAL and NWA were to merge, I wonder what the hubs would look like. Dump CVG, keep Detroit and Minneapolis, use Memphis to relieve Atlanta a bit?

How about with UAL? Very interesting...

Relieve Atlanta? We aren't even at capacity. Atlanta is here to stay. Memphis will be the first hub to go and the MEM airport authority knows it. Not to mention a seventh concourse at ATL is already under construction.

The two vulnerable Delta hubs are CVG and SLC. In the event of a UA merger, all of that carrier's hubs are at risk. Same goes for NW. Delta has the best balance sheet and would be the "decider" in every scenario. DL is foaming at the mouth for the Asia assets involved here. Both carriers have substantial presence in Asia - not to mention a LOT of heavy lift (i.e. UA's 777-200ERs, nearly identical to DLs).

I wouldn't be surprised if the next deal in the coming "spur" of mergers is between F9 and B6, especially considering F9's latest financial report.

Heres to wipeing NWA's signage off the face of the LGA terminal. (raises glass)
But seriously either way Delta will have it's first 744's after a merger.

How reliable are these rumors anyway? We've been hearing merger talks with almost every airline in some way lately.

This merger would finally be the needed death of a legacy carrier to alleviate a very full auditorium of airlines.

It's not a rumor, Phil. It's the real deal.

My personal opinion is that in 6 months "Northwest Airlines" will cease to exist. Our new CEO was the first step in the process.

[airlinerstp://www.airliners.net/open.file/0540178/L/[/airliners

Finally NYCA has got it's own merger thread! :)

I agree that there has to be at least one legacy "death" in order for the industry to survive in the long run, but the biggest problem I see with a merger of two domestic legacies is the mass redundancies it creates. With a merged carrier you get hubs in close proximity that serve the same markets (DEN/SLC, MEM/CVG/MSP, DTW/ORD/ATL), incompatible fleet types (767 vs. A330, A32X vs. 737, etc). I know that a lot of people say just eliminate the most costly less profitable redundancies, but there are massive amounts of costs involved in closing stations, eliminating fleet types, laying off people. Yeah it's a cost savings in the long run, but does a merger create enough capital and economy of scale to make it worth it? One has to ask, does anyone really see a merger scenario between legacies actually working out? One of the reasons we haven't seen consolidation happen so far is because it's been a fight to the death for legacies on their own, and we almost saw US Airways bite that bullet a few years ago.

I understand that DL wants Asia rights and I definitely think that they should be pursuing that as it's an enormous market that they have definitely missed out on, but is the mass cost associated with a merger really worth the benefits to merge with another carrier?

Very curious to hear other people's thoughts on this.

Who would have thought Pan Am would have ceased to exist? Or TWA for that matter? My point is: never say never.

Chris - man is that ever true. I never thought I'd see the day when the TWA name was gone from our skies...

I'm also biased against a DL merger, I like them the way that they are now and I think they've been doing great post-chapter 11. But if there's a legitimate business case for a merger, then c'est la vie...

I agree that the costs of merging are also high. Reduction of service to those smaller cities and areas around closed hubs will hurt economically throughout their whole cities. That's how business works, unfortunately.

It's clear that no airline will let themselves die out, and that mergers are the easiest last-minute life preserver for those in trouble. You keep most employees happy (until some get laid off), continue the heritage of the absorbed airline (though technically defunct at that point), make shareholders happy, and evne the Execs that get let go will get hefty bonuses. It's a sneaky way of closing up shop.

For Delta, it gives them breathing room to continue to grow, which I feel might have already been overly aggressive. Time will tell.

Assuming Delta does go with Northwest, I wonder what United will do. I wonder what the effects will be on the "losing" airline.

As for cutting the redundancies, I'm sure Delta knows they will need to cut aircraft types and keep their fleet as undiversified as possible as they grow. But what's the demand for the Airbus' that they'd be receiving? I don't even know of NW owns or leased what they have.

It will be interesting to see how this plays out.

I'd read somewhere on a.net that NW had returned a bunch of A319's & 320's and even 757's that were on high-leases. As for how many out of their fleet is owned vs. leased, I'm not sure, but I think it's a fair bet to say that most of their newer narrowbodies are leased. As we all (probably) know, the Diesel 9's are owned (and in my opinion, though sadly, would probably be parked as part of the domestic capacity cuts if DL & NW merge).

How about A330 vs. 767, where do you think that would come out, especially with DL looking for additional 777 lift?

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I really hope that if DL did acquire Airbus family in a merger, that they'd dump them and stick to Boeing

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They dumped the Pan-Am A310's rather quickly after gettign those..

I'd read that Delta not only got some Pan Am A310's but also had tried some new builds. I also believe this was a major decision in going with the 763ER. I can't imagine DL, with Boeing being such a big creditor of theirs and operating such a big Boeing fleet, sticking with Airbus.

I think it's obvious that if one needed to go, the A330 would de dropped. I think Delta has 36 767s, which is a type that is paired with their large 757 fleet (pilots' rating is paired together). There's no reason to keep the A330s (31 of them), unless they will want to hold onto them for certain NW routes they will keep until they can replace the type with more 767s or 787s.

I have to laugh a bit guys about dropping this and dropping that aircraft type...here's the deal....NO aircraft that is under a contracted lease will or can be dropped without the airline paying a HUGE payout to the leasing company.

Also have you asked yourself how will this new airline operate the routes it operates now if it starts removing planes from its fleet, especially long haul? Delta doesn't have the fleet to operate a combined DL/NWA or DL/UAL route system. Also why would it be so bad for Delta to operate a combined Airbus/Boeing fleet? Because of fleet commonality??? HELLO!! Delta operates a variety of Boeing products now and MD products that aren't as some say "compatible" *rolls eyes*. UAL and NWA operate even a greater variety of aircraft, why you ask....? Well because they need to. These are comprehensive network carriers that need an extremely diverse fleet to serve the markets they serve. To even compare them to airlines like WN, B6, and AirTran who only operate two fleet types (which btw aren't common to each other either) is just silly, you can't compare the two. Honestly guys you need to remove the idea that a common fleet type is the end all be all, its not.

Please go read the studies on ATW and what the other industry experts say about this common fleet type idea, its one of the biggest urban myths in the industry today. Just because some LCC's have a limited amount of aircraft type doesn't make it the trend for the industry. The LCC's serve a very limited market and they only require one or two types of aircraft. DAL, NWA, and UAL serve a HUGE market that requires very different aircraft to meet its needs.

One of the biggest winners here that people don't realize is American. While Delta is bogged down merging two giant airlines together, American will be at a huge competitive advantage because they won't have to deal with a merger. It will give AA time to organically grow in profitable markets as they continue to build a major global gateway at DFW. This also holds true for WN; WN will be able to capture a HUGE amount of domestic traffic from these merging giants. Watch as AA and WN come on real strong in 2008.

The real facts about this merger are pretty simple....the only winners are the shareholders, lawyers and consultants. Everyone else will lose...1000s will lose their jobs, cities will lose service, and the consumer will lose choice in air travel. Those are the real facts.

For those that don't subscribe to the NY papers like me...

Here are two articles that discuss the DL/UA and NW/DL mergers.

http://www.chicagotribune.com/business/ ... mepage-fea
DL/UA


http://news.enquirer.com/apps/pbcs.dll/ ... /301160029
DL/NW


Alex

Don't forget the 18 (I think) Boing 787's Northwest has on order.

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Originally Posted by hiss srq

Heres to wipeing NWA's signage off the face of the LGA terminal. (raises glass)
But seriously either way Delta will have it's first 744's after a merger.

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Delta wants to kick NWA out of their terminal at LGA anyway. This is holding up the lease renewal because the Port is trying to force Delta to keep NWA.

I am aware of that as well. At this rate either I am going to have one less callsign to deal with on the west side of the field or one less on the extreme east side of the airport once Delta gets it over with. I am pulling for the callsign to be from the extreme east of the field though. Some Delta DC9's would be nice afterall.

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Originally Posted by emshighway

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Originally Posted by hiss srq

Heres to wipeing NWA's signage off the face of the LGA terminal. (raises glass)
But seriously either way Delta will have it's first 744's after a merger.

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Delta wants to kick NWA out of their terminal at LGA anyway. This is holding up the lease renewal because the Port is trying to force Delta to keep NWA.

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What a terrible terminal.

In the event of a NW merger, the DC-9s would be the first victim.

They're trying to get rid of the DC-9s anyway, no?

Considering they're parking them month after month, yes. You'll never see a DC-9 in Delta colors ever again.

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Originally Posted by Ari707

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I really hope that if DL did acquire Airbus family in a merger, that they'd dump them and stick to Boeing

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They dumped the Pan-Am A310's rather quickly after gettign those..

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I remember reading Delta was unhappy the 310s would sometimes require fuel stops on international flights.

Actually, we ordered some of our own after the merger. Delta actually liked the A310, but committed to the 767-300ER instead.

Would a DL and NW merger make "DLNW" Airlines the biggest US Legacy Carrier, surpassing AA?

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Originally Posted by JetBlueAirwaysFan

Would a DL and NW merger make "DLNW" Airlines the biggest US Legacy Carrier, surpassing AA?

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It would be the biggest airline period, Legacy OR LCC surpassing WN and AA in everything almost, total aircrafts, number of flights, passengers flown...

Alex