United-Delta merger would create world’s largest airline
A rumored merger of United and Delta Air Lines Inc. would create the largest airline in the world, with combined revenues of roughly $37 billion that would dwarf the current industry leader, American, with about $23 billion.
“There is a sense of urgency in the talks, which have been going on for some time and continued as recently as a week or so ago, an official with knowledge of the talks said,” said the AP, which apparently first reported the news.
That would make sense because airline executives would want to get approval necessary federal approvals before a new administration is formed after the next federal election.
Industry experts say the two airlines have complementary networks. Delta is strong on the East Coast and in Europe. But that a merger would be difficult because it could be challenged by politicians. Employees might also raise issues.
Such a move would offer financial relief to both airlines.
Pardus Capital Management, which owns both Delta and United stock, has been urging the move. The company in a letter identified $585 million in annual savings from the merger, according to The New York Times.
Pardus executives said a Delta combination with Northwest would produce even bigger benefits of about $1.5 billion, primarily from combining the smallest hubs – Detroit/Cincinnati and Memphis/Atlanta.
Delta President Ed Bastian downplayed the move, denying that the Atlanta-based carrier is in serious merger talks.
“We have no negotiations ongoing,” he said. But he added that the rise of oil prices to near-record levels has led Delta to consider a merger.
The talks involve United being the name of the combined airlines, the headquarters staying in Chicago and Delta’s Atlanta hub being an operational center for the two carriers, one official said.
Delta said in a statement that its board has established a special committee to work with management to review and analyze strategic options for the airline.
Robert Mann, an airline consultant in Port Washington, N.Y., said the biggest problem would be that neither carrier has any recent track record of integration.
“I would see this as a very risky move from the standpoint of the actual implementation,” Mr Mann said.
Report by David Wilkening
David
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