Delta, Northwest Agree to Combine

[Omaha Steve]

Source: AP

By HARRY R. WEBER

ATLANTA (AP) - Delta Air Lines Inc. (DAL) (DAL) and Northwest Airlines Corp. (NWA) (NWACQ), squeezed by record high fuel prices and a slowing economy, are combining in a stock-swap deal that would create the world's biggest carrier.

The boards of both companies gave the deal the go-ahead Monday.

The announcement could spur other airline combinations. The most likely scenario that has been talked about is a potential deal between United and Continental airlines.

Under the terms of the Delta transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own. The exchange ratio represents a premium to Northwest shareholders of 16.8 percent based on Monday's closing stock prices.



Read more: http://apnews.excite.com/article/20080415/D90298OG0.html

[gear_head]

1. welcome news, Norrthworst is gone n/t

[liberal N proud]

2. I predict that airlines will merge with one-another until there is only one left

Then we will all be paying dearly to travel. Even more than we are now.

[Bake]

3. I guess now they can lose even more money.

Look for a Chapter 11 filing shortly after the merger.

Bake

[Haole Girl]

5. Huh?

You are basing this assumption on what exactly?

:shrug:

[Bake]

6. Oil's at $112 a barrel. Delta recently came out of Chapter 11

Airlines lose money. It's in their business plan. The price of oil is killing them; since fuel is their largest single variable cost. Fares are going to have to rise with the price of fuel, but higher fares squeeze the non-business traveler (family going to grandma's, e.g., or going on vacation) out of the market. Hence, profitability is going to be hard to come by.

At least three smaller carriers have already shut down (not Chapter 11, but grounded, shut down): ATA, Aloha Air, and one other whose name escapes me at the moment.

Bigger isn't necessarily better ... except that if the biggest airline in the world is in trouble, it's easier to get a government bail-out.

Just a humble prediction, but those are the premises on which I base it.

Bake

[bluevoter4life]

4. Some of the details are a little sketchy

Especially with their announcement of no hub closures. With hubs now located at Atlanta, Cincinnati, Memphis, Detroit, Minneapolis, JFK, and Salt Lake City and significant focus cities located in Boston, LAX, Portland, and Seattle, this will create logistical nightmare. Throw in the additional SkyTeam hubs at Cleveland, Houston, and Newark and my God, you got a mess which means the potential for some pretty pissed off customers. (Those who follow the airline industry will hopefully understand my ramblings).

This could be entertaining to see how this affects future consolidations (United/ Continental for instance) and I can't wait to see how American reacts. It'll also be interesting to see how long this "new" airline will last before they realize their dilemma and start shedding jobs and closing hubs.