Delta in Merger Talks with United, Northwest

[Matt Molnar]

Wall Street Journal:

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)

[ChrisW]

Muahahahahaha!

[PhilDernerJr]

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.

[RDU-JFK]

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

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...

[ChrisW]

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).

[ChrisW]

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.

[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.

[PhilDernerJr]

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.

[ChrisW]

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

[kc2aqg]

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.

[ChrisW]

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

[kc2aqg]

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...

[PhilDernerJr]

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.

[kc2aqg]

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?

[Ari707]

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

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