US Airways proposes merger with Delta...

[Nonstop2AUH]

Details of proposal at following link....


http://www.usairways.com/awa/content/op ... fault.aspx


On CNBC Mike Boyd says it's a purely financial deal, only good for stockholders and bankers, bad for consumers (i.e. higher prices/less service) and bad for employees (i.e. layoffs) regardless of what Parker says. They also spoke to analyst Ray Neidl, who was noncommital about whether or not he liked the deal but who agreed the cost savings were compelling, and then they got Doug Parker on the phone who more or less stated that they have a formula for combining airlines to realize synergies (this is the kind of talk investment bankers love and employees hate) and he saw no reason why a Delta merger wouldn't be as successful as AW/US Air. He said Delta had not yet responded but had basically turned down an earlier approach some months ago. What's obvious is some hubs would have to go (or be severly cut back, especially Charlotte) for this to work and if they are going to realize the kind of cost savings they are talking about, employees should start sending out resumes now...

[Art at ISP]

This whole thing doesn't sound right. It may be a ploy to run the stock up for some reason.

I still think the most sense would be for US to buy Northwest--or what's left of Northwest. There are aircraft synergies, hubs which don't overlap badly (except perhaps MEM), and the SHARES reservation system which US uses is based on Worldspan, which NW uses.

I think something else is up here--we're just not seeing it yet.

[RDU-JFK]

It would never happen, but if it did, I would hate to see Charlotte hub go :(

[hiss srq]

I truely hope that we do not do this. Without that mess of an airline we really are looking at amazing things on the horizon as it is. Do not do it Doug!

[Matt Molnar]

This whole thing doesn't sound right. It may be a ploy to run the stock up for some reason.

Agreed. Sure enough, all the airlines have had major spikes today...

As of 11am:
US (LCC) +13.2%
Delta (DALRQ) +8.2%
Northwest (NWACQ) +10.5%
Continental (CAL) +7.2%
JetBlue (JBLU) +6.9%
Alaska (ALK) +5.3%
Hawaiian (HA) +5.1%
American (AMR) +4.7%
Southwest (LUV) +3.2%

[Ari707]

The Merger with America West seemed to be a great fit, very few overlaping routes, similar fleets. US and DL, have tons of overlap, especally in the southeast, US is Airbus based, while DL is boeing
based. and would they really need hubs and major citys in Boston, LGA, JFK, PHL, CLT, and ATL???

And which shuttle do they sell????

[Ari707]

http://images.delta.com.edgesuite.net/d ... 082704.pdf found this while looking at DL site,

[RDU-JFK]

So let's say by some miracle Delta agrees to this merger and the regulators by another miracle approve this. We'd have the following Hubs/foci:
Las Vegas, Phoenix, Salt Lake City, Cincinnati, JFK, Philly, Charlotte and Atlanta, with focus cities in LGA, DCA, BOS, and PIT.

Which would they keep? Well there's still a gaping hole in the Midwest but US is fine with that now. I would keep PHX, LAS, PHL, and ATL as hubs, and reinforce LGA, CVG and CLT as domestic/regional focus cities. JFK would be an international focus city. Your thoughts?

[nwafan20]

Serisouly, Parker needs to give it up. First America West, now DL? He is like a horny teenage kid, out looking for sex!

[LGA777]

NWAFAN20, very intelligent reply. Doug Parker is a true visionary in this industry you seem to know so much about. As an employee of DP's, today's news could mean many pluses and negatives in my future career, and it probably has less chance of approval than it does, but unless you know much about Mr Parker, you should think twice about describing this aviation genius like that publically. And BTW I don't know many horny teenagers who put together EIGHT BILLION DOLLAR Deals !!

Respectfully

LGA777

[nwafan20]

I'm sorry if you find my knowledge of the aviation field not adequate, I do my best with my own personal knowledge.

I apologize if I have offended you but from what I have seen with what he has done with US Airways I don't have much respect for the man. (again, No offense) I would hardly call him an "aviation genius"

But in all seriousness, how many airlines does he want to merge with? DL/US isn't a very good fit...

[LGA777]

Thanks NWAFAN20, very fair response, I appreciate it. We have different views on what he has done at US, and I am glad we live in a world we can express different views, that's the way it should be. As far as the genius thing I think History will determine who is right, and I think 50 years from now he will be up there with the best of this era, but time will tell.

LGA777

[PHL Approach]

I could not agree with you anymore Ron. Mr Parker knows what he is doing, he is a true business savvy genius. Or else he wouldn't even dream of putting up a bid for Delta if he didn't think it could work. If this goes through which I have high hopes that would mean he's spawned two sinking airlines into successful green making entities. I think the fleet advantages from getting DAL are tremendous, he would be able to offer many routes for the main thing he is really into offering which would be Trans-Atlantic service, possibly Trans-Pacific out of PHX. Who knows...

[Nonstop2AUH]

For full disclosure, I've never worked in the airline business, but I have worked on Wall Street for 8 years, which is long enough to understand why this sort of deal is compelling to the Street in almost any industry.

You start with the theory that there are too many airlines in America (or banks, or restaurants, or widget makers, etc.) and, obviously not all will be successful long term. You then assert that since consolidation is inevitable, you want to back a winner so you line up some financing to actually instigate the consolidation with a merger bid. Bankers, lawyers, auditors all get paid nice fees, mostly up front. There's alot of talk about synergy and efficiency. The stocks start to run as investors speculate about other bids and such.

You then go to regulators with the story that the deal is not really about consolidation, it's in the spirit of competition, and that it would be protectionist/reactionary/socialist etc. to block a deal that would create a stronger, more efficient industry for consumers - of course at the same time you conveniently don't mention the layoffs, service cutbacks and higher prices needed to realize the synergies. If they don't approve the deal, things go back to status quo except that bankers, lawyers and auditors made some very nice fees along the way and maybe Manhattan condo prices go up. If they do approve the deal, the bankers, lawyers and auditors get even bigger fees, and the management teams get a nice payout for themselves, might even exit the scene having engineered the deal, but in any event, it almost always ends up falling to the employees - who never asked for this - to deliver to the shareholders the synergies that management promised and was so excited about.

Basically, you can't create value out of thin air, 1 + 1 doesn't equal 3 except in Wall Street powerpoint presentations. Behind the fancy graphics and vocabulary, the only way real value is created in this sort of thing is by cutting jobs, compensation and service while charging the consumer higher prices. Just my 2 cents as a former Wall Streeter, but if someone knows of an airline merger of this size that enhanced shareholder value while also being favorable to consumers and labor, I'd love to hear about it.

[Nonstop2AUH]

Having re-read the thread we have some comments from US Airways employees or at least Doug Parker fans, any thoughts today from Delta people if there are any here? Seems like management is quite certain they can get out of bankruptcy on their own, but as is pointed out on the A.net thread, it's really the DL creditors (i.e. Boeing and some financial institutions) who get to decide whether to take the offer or give it a go. It seems to be really about Doug Parker and Citigroup's money vs. what the DL creditors want. Is this all being taken as a serious offer internally, and are DL employees worried?