Mikael

We saw the Delta-Northwest combination becoming reality this week but there is still a lot of speculation about more future mergers. Most analysts expect United and Continental to be the next major US airlines to join their forces.

Which of these four carriers can you see combining their operations?


American Airlines
United Airlines
Continental Airlines
US Airways

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Beemer B773ER

As stated, CO and UA had already begun negotiations months ago, but that initially got nowhere just like the DL-NW situation. So if they follow down the same path, you'd expect the two airline's to become one, and more likely than not the United name would be kept since it has greater global awareness and exposure. CO (like NW) have a number of 787s coming in the near future, so that bodes well if the two company's merge.
Similar to the DL-NW case, there will be a clash in the narrowbody category with UA moving towards the A32X family while CO maintains a fleet of 737s. The mid-size widebody category is a good match with both airline's operating an extensive fleet of 767s and 772s, though there may be issues with the engines, since CO's 767s and 777s are fitted with GE engines, and it's no secret that UA and GE don't get along well. But that may be a mute issue when considering the scale of the decision to merge.


There is some small talk that AA may merge/takeover Alaskan Airlines, although I don't really see that happening with both airline's doing well on their own as well as with their codeshare agreement... but hey, you never know. They may merge into one company, but still operate individual fleets like Air France and KLM's arrangement.

US Airways seems to be a loner in all this with little to no talk about a possible merger with another airline.

Michael

Excellent thread.

I don't know what is going to happen. I am somewhat biased towards UA and truly wish that if they do merge that the UAL name is kept and not lost forever. It is truly unfortunate to start to see the possiblity of legacy carriers come together and loose names.

I think that if CO and UAL combine that it may work. However, one thing that should be noted, that was noted with the DAL and NWA merger, is that you must, or should, have the same equipment so that the transition is easy. I don't think that UAL and CO combine well. However, some people at airliners.net really hit it hard when US Airways--which by the way I flew recently and have nothing but excellent things to say--is mentioned into a possible merger between UAL and them. I personally think that, equipment wise, they are more compatible. However, if the UAL name is going to be lost then forget it.

I think this is going to turn out rather interesting for American. American was on top of its game and truly came out no where when you consider its origins in aviation. They were the big airline not to mess with. Now, however, that is changing with DAL becoming larger than them. If UA and CO merge then I believe that will be even bigger than the DAL merger and shall bump AA to 3rd?

Choleric

What about southwest, frontier, and midwest express?

Beemer B773ER

Hmm.. interesting thought this. Both airlines have a narrow-body fleet commonality with both A32Xs and 737s, as well as having commonality with 757s and 767s...but the similarities end there with US Airways showing their favoritism towards Airbus and their A330s and also having placed orders for A350s, while UA have a large fleet of 777s and 747s. It sure is an interesting scenario if UA and US look into a merger. You'd have to say that if the two were to merge the United name would most likely remain due to its international recognition and reach.

As for Southwest (WN)... I very much doubt they're looking to merge with anyone else. They are very very focuses on maintaining their 737-fleet for the sake of simplicity and cost-efficiency, but I was half-waiting for WN to come to the rescue or take-over ATA when the airline filed for Ch.11 recently. Didn't happen, so this makes me think WN is more than happy to go it alone and maintain confidence in their business model. Frontier.. well, although their recent filing of Ch.11 may have caused concerns in some peoples' eyes, after reading the threat at A.net, it seems more of a protective measure than an imminent end for Frontier, so I see them also going it alone and battling on (however long they can).

Michael

The 737's would go fine since UAL had the 400 seris for a while and have retained them. Either way, any 737 would be nice.

The a319, 20 and 21 they have will expand that line up that UAL has.

The 757 would also increase, however, the pratt and whitney that are used by UAL are not compatible with those of US.

The 767 would also be a nice addition since both airlines have the same models

The 330, 777 and 747 would be the only non-overlapping aircraft. However, it should be noted that this would not be a bad thing but rather a good thing. The 330 and 777 could work together to expand international routes while the 747 can stick with asia and the pacific.

You see, the equipment iself is not the problem. The engine selection is. That is the problem with mergers of airlines that have completely different setups.

Mikael

Yesterday United reported a 537 million loss for the first quarter. They really need to do something soon and I believe they will.

American has to look at what they can do with either US Airways or Continental since American-United would not get antitrust approval.


Northwest & Continental tried to merge in 1998 and United and US Airways did the same in 2001. Both were blocked by DoJ.

US Airways also attempted a takeover of Delta when the latter was still under Ch. 11 bankcruptcy in 2006. It was rejected by Delta's creditors.

Things have changed since and now the atmosphere is much more "merger-friendly".

Good point, Jeff! I was thinking about the four other members of the "Big Six" here but indeed, it is likely that there will be consolidation among the domestic (non-international route) airlines as well.

The Diva

NEWS ALERT
from The Wall Street Journal


April 26, 2008

Less than two weeks after Delta Air Lines and Northwest Airlines unveiled their plan to merge, United Airlines parent UAL is nearing a decision about its potential merger partner. The deliberations come as talks are heating up among carriers worried about being marginalized if they don't combine in a deteriorating industry climate.

UAL, which already has had detailed merger talks for at least a month with US Airways Group, recently embarked on parallel discussions with Continental Airlines, according to people familiar with those situations. United wants to come to a decision about its preferred outcome in the next couple of weeks and a deal announcement by mid-May could be in the offing, said one person familiar with the matter.


There you go!

Mikael

Funny, I just read the same news article yesterday.

Mikael

Mon Apr 28, 2008 7:24am EDT
By Jui Chakravorty Das

NEW YORK (Reuters) - Continental Airlines Inc (CAL.N: Quote, Profile, Research) has called off talks with United Airlines (UAUA.O: Quote, Profile, Research) because of United's weak financial condition and a feeling that a merger would risk its own financial health, a source briefed on the matter said on Sunday.

The source also said Continental is in "advanced talks" with British Airways PLC (BAY.L: Quote, Profile, Research) and American Airlines (AMR.N: Quote, Profile, Research) about a potential alliance, with plans to seek antitrust immunity.

American did not immediately return a call seeking comment and Continental was not reachable for comment. United Airlines Chief Executive Glenn Tilton, who has been a proponent of consolidation, said the company's strategy is consistent.

"Consolidation is underway - ensuring you have the right partner is everything," he said in a statement. "We will pursue all options to ensure a strong, sustainable future for our airline."

Sources had told Reuters earlier this month that United was also in serious merger talks with US Airways (LCC.N: Quote, Profile, Research).

Continental's decision comes after Delta Air Lines (DAL.N: Quote, Profile, Research) and Northwest Airlines (NWA.N: Quote, Profile, Research) said nearly two weeks ago they planned to merge and become the world's largest airline, seeking to counter skyrocketing fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.

Continental said on Sunday in a letter to its employees it has chosen not to merge with any other airline at this time but will continue to consider an alliance with other carriers.

"We have significant cultural, operational and financial strengths compared to the rest of the industry, and we want to protect and enhance those strengths -- which we believe would be placed at risk in a merger with another carrier in today's environment," Chief Executive Larry Kellner and Vice President Jeff Smisek said in the letter.

Continental's decision comes a few days after United's shares plunged more than 40 percent in one day when it posted a loss of $537 million in the first quarter.

One source familiar with the matter said the development came as a surprise to United, which had been negotiating in expectation of reaching a deal by late this week.

URGENCY TO CUT COSTS

After racking up $35 billion in losses and finally emerging from a 5-year slump in 2006, U.S. airlines are hoping mergers could give them greater market power to reduce flights and raise fares.

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.

Continental, which has said it would prefer to remain independent unless the competitive landscape changes, had laid most of the groundwork for a merger with United, sources had told Reuters.

Under terms that were being negotiated, Continental's Kellner would have been CEO of the combined company and Smisek would have been president, sources said. United CEO Glenn Tilton was to get a seat on the board of the combined company.

But talks broke off this weekend, with Continental now focusing on an alliance with BA and American.

Airline alliances allow partners to streamline costs while sharing revenues. Without antitrust immunity, the data and revenue shared on the routes would normally be considered collusive.

American and British Airways have tried twice, without success, to win immunity from the government for their transatlantic alliance.

Regulators have long been concerned that stronger ties between American and BA would jeopardize competition at London's Heathrow airport for other U.S. carriers.

But air travel restrictions have eased under a U.S.-European Union "Open Skies" agreement that took effect in March, creating new opportunities for transatlantic air services.

Earlier this month, the U.S. Department of Transportation granted tentative antitrust immunity to the SkyTeam alliance involving Delta, Northwest, Air France-KLM (AIRF.PA: Quote, Profile, Research) and Alitalia (AZPIa.MI: Quote, Profile, Research).

Continental, which has a marketing alliance with SkyTeam but was not part of the group that received antitrust immunity, will review its participation in that alliance.

American Airlines is part of the 10-member oneworld alliance, which includes BA, Cathay Pacific (0293.HK: Quote, Profile, Research), Finnair (FIA1S.HE: Quote, Profile, Research), Iberia (IBLA.MC: Quote, Profile, Research) and Japan Airlines (9205.T: Quote, Profile, Research). But Continental's talks, for now, would focus on grouping with only BA and American.

U.S-UNITED?

This paves the way for a deal between United Airlines and US Airways, which have had serious merger talks of their own, according to sources briefed on the matter.

UAL's market value stands at $1.8 billion, while US Airways is valued at $657 million, one of the lowest among major carriers.

A United-US Airways deal foundered in 2001 on antitrust concerns. But consolidation proponents say the industry and the two carriers have changed dramatically.

Both have restructured hubs and routes during long stays in bankruptcy, and United has slashed domestic capacity to focus more on international routes.

Analysts have said a United-US Airways merger would not be very complex as wages at the two carriers are closely aligned and their fleets mesh well. The two are also part of the same global marketing alliance.

US Air could not be reached for comment.


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