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January 31, 2007

Is the US Airways/Delta Merger Finished?

US Airways' CEO said yesterday that they have made their final offer for Delta and that if Delta's board doesn't want to approve it, the offer will expire February 1.  He also dismissed speculation that US Airways would up the bid by $1 billion.  So, with Delta off the table, is Northwest next?  If Delta and Northwest made sense, and Delta and US Airways made sense, wouldn't US Airways and Northwest make sense (as much as any of these ridiculous rumors make sense)?  When we will start hearing those rumors?

(UPDATE: IT'S FINISHED.)  US Airways frequent flyers who were dreaming of using their miles to fly to Kiev or Dakar should shelve those dreams and book their free flights to Elmira or Franklin-Oil City or wherever US Airways flies.

January 31, 2007 | Permalink: Is the US Airways/Delta Merger Finished?


Well, first, let's see what happens today. If Delta's creditors turn down USAirways' bid, they will literally be forfeiting BILLIONS of dollars. But if they are that financially stupid (and there certainly is some evidence they are), you could make an argument that USAirways should move on to Northwest.

Parker has figured out that the best way to buy an airline is in bankruptcy court. And there's only one other major airline in bankruptcy. That said, Northwest presents fewer "synergies" (aka overlap) than Delta, so the amount of money Parker could throw at their creditors would be less. Of course, there would be a bigger "network" advantage (think Asia) and fewer antitrust issues. It would also bulk up USAirways such that they themselves wouldn't be a target, which is something Parker presumably prefers.

One also must wonder whether Parker has the stomach for yet another hostile bid. Hard to see why Northwest's management -- and creditors -- would be any more receptive than Delta's. You could argue that "money" seems to be more important in Northwest's culture than Delta's, so perhaps they'd get a warmer response.

It is also worth noting that Parker has a history of "moving on" to new deals. He initially tried to buy ATA's Midway hub. After Southwest derailed the offer, he moved on to the better deal with USAirways. So he's obviously a guy to watch.

: iahphx at Jan 31, 2007 9:36:02 AM

did you just apply the law of: P -> Q and P -> R, therefore R and Q? or is it RdRr?

: modus ponens at Jan 31, 2007 10:09:35 AM

It is the derivative of R-squared DR. Thanks for pointing that out, Kwijybo.

: Jared at Jan 31, 2007 12:29:34 PM

There's a great quote from AP on this topic:

""Airline consultant Stuart Klaskin of KKC Aviation remained unconvinced US Airways will abandon its consolidation dreams.

"I personally think they are going to turn their attention very rapidly to other markets," he said. "If I were the management team at Northwest Airlines, I would be awaiting the call from Parker.""

: iahphx at Jan 31, 2007 2:08:00 PM

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