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| Version | User | Scope of changes |
|---|---|---|
| Apr 20 2008, 8:16 PM EDT (current) | jimglab | 415 words added |
| Apr 20 2008, 8:15 PM EDT | jimglab |
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Speculation heats up about additional combinations
Immediately after Delta and Northwest formally announced their merger plans, airline analysts and media pundits started speculating on which airlines would be the next to combine, since it is widely assumed that the DL/NW deal would spur other legacy carriers to consolidate as a defensive measure against the new global giant. The possible “second merger” most widely discussed has been United and Continental, with some on Wall Street predicting it could come within the next two weeks. However, there were some media reports last week that United has also held preliminary merger discussions with US Airways, and according to the Arizona Republic newspaper, US Airways CEO Doug Parker “did nothing to refute” that speculation. In fact, the newspaper said, Parker sent a message to employees saying that additional mergers “could result in a much healthier industry.” Parker has a pretty good understanding of mergers, since he spearheaded the combination of America West with US Airways three years ago.
United CEO Glenn Tilton issued a statement after the DL/NW announcement reiterating his longstanding support of consolidation. Tilton said the airline industry “has changed dramatically…and the old paradigms no longer apply.” He added that United “will participate in consolidation when and if it is the right choice.” Continental CEO Larry Kellner told employees that Continental’s preferred option of staying independent might no longer be viable since the DL/NW deal “will change the competitive landscape.” He said Continental must also “review our continued participation in the alliance with Northwest, Delta and SkyTeam” in view of the merger. And most significantly, Kellner noted that the DL/NW deal allowed Continental to buy back the so-called “golden share” that Northwest held in Continental – an equity stake that gave Northwest the right to block any Continental merger.
No one seems to be talking much about a possible merger involving American Airlines, which last week reported a first quarter loss of $328 million. CEO Gerard Arpey told the Dallas Morning News his big challenge right now is being profitable. “We believe we will remain competitive irrespective of any consolidation that occurs,” the newspaper quoted Arpey as saying. Meanwhile, the Milwaukee Journal Sentinel speculated that as the Delta/Northwest deal goes through its regulatory review, the government might decide Northwest would have to give up its recent investment in Midwest Airlines – it now owns a 47 percent stake – and if so, AirTran might make another run at the Milwaukee-based carrier.
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