Airline merger talks heat up
The hottest topic in current US airline circles: consolidation. The major reason: continued escalation of fuel prices.
Northwest was reportedly discussing a merger with Delta Airlines while executives at both companies confirmed to employees that the move may be necessary for the carriers to remain competitive.
Northwest Airlines has entered into formal merger discussions with Delta Air Lines and will look for another partner, United, if that effort fails, the chairman of the US House Transportation and Infrastructure Committee said in a newspaper interview.
US Rep. Jim Oberstar confirmed the talks in an interview with the Minneapolis Star Tribune, saying he met with two Northwest executives who also told him the airline would try to merge with United if the move fails.
The Minnesota Democrat said Ben Hirst, Northwest’s senior vice president of corporate affairs and administration, and Andrea Fischer Newman, Northwest’s senior vice president of government affairs confirmed that Delta is considering both Northwest and United as options for a merger.
“Northwest sees a benefit to them of a merger with Delta,” Mr Oberstar told the newspaper.
During the meeting, the congressman said the executives talked about how a merger would yield cost savings and that the two carriers’ route networks are complementary, with Northwest strong in the Pacific and with Delta with a major presence in the Atlantic. There is also little route overlap.
At the same time, the chiefs of Delta Air Lines Inc. and Northwest Airlines Corp. told employees that their carriers may need to link with another company to remain competitive, reported Bloomberg.
“Delta would be open to consolidation if it is in the best interests of our shareholders and our employees,” Chief Executive Officer Richard Anderson said in a recorded message, reiterating previous remarks.
Northwest CEO Doug Steenland said his company must “pro-actively consider all options.”
The messages give further momentum to the prospect of mergers as a 64% rise in jet-fuel prices in the past year threatens carriers’ profits.
American Airlines parent AMR Corp. today blamed rising fuel costs for a quarterly loss of $69 million, ending six straight profitable quarters. The eight largest US carriers will post a combined deficit of $450 million for the fourth quarter, according to an estimate by Michael Linenberg, a Merrill Lynch & Co. analyst.
Report by David Wilkening
David
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