Kip Powick Posted November 14, 2007 Share Posted November 14, 2007 Delta says it's open to merger Hedge fund with big stakes in both airlines urges a merger; Delta says it has committee looking at possible deals. November 14 2007: 3:30 PM EST Delta Air Lines said it was already looking at possible mergers even before a hedge fund with a large stake in the company proposed a Delta-United Airlines combination. NEW YORK (CNNMoney.com) -- Delta Air Lines said Wednesday it is open to a deal with another airline in the wake of a push by a hedge fund to combine Delta with United Airlines. A merger, which is being proposed as an answer to soaring jet fuel costs, would create the world's largest air carrier. A Delta-UAL tieup would likely spark a round of industry consolidation and sharply reduce the choices for passengers, while possibly leading to higher fares on some routes. Pardus Capital Management, which according to federal filings has 3 million shares of Delta (Charts, Fortune 500) and 5.6 million shares of UAL (Charts, Fortune 500), sent a letter to the airlines Tuesday that proposed a stock-for-stock combination. Pardus' holdings represent about 1.3 percent of Delta's shares and nearly 5 percent of UAL. United is the No. 2 carrier, behind only AMR Corp. (Charts, Fortune 500) unit American Airlines; Delta, which emerged from bankruptcy earlier this year, is No. 3. Officials from United and Pardus were not immediately available for comment. Delta issued statements denying a report that it has already had merger talks with United but adding that its board has formed a special committee, headed by its non-executive chairman, to analyze strategic options. It also has retained financial and legal advisors to assist in this review. "We appreciate receiving Pardus' views on the best course for Delta's future," said the statement from Delta CEO Richard Anderson. "We have been consistent in our public statements that Delta believes that the right consolidation transaction could generate significant value for our shareholders and employees and that strategic options should be evaluated. With oil at over $90 a barrel, this analysis takes on a heightened importance as we factor those prices into our long-term planning process." Importantly, the Delta pilots union issued a statement saying it would not oppose a combination. Opposition from pilots has been a barrier to proposed airline deals in the past. "Many analysts have suggested that airline industry consolidation is inevitable. The Delta pilots are not opposed to a rational and sensible consolidation scenario," said a statement from Lee Moak, a Delta captain and the head of the Air Line Pilots Association unit at the airline. "The 'right' merger opportunity could draw our support and result in a successful merger. However, we are not interested in a transaction just for transaction's sake." Moak said that the pilots could only support a deal if it is included in merger discussions from the beginning of the process. "Any consolidating event which involves the Delta pilots will not happen without our active participation and consent," he vowed. Jet fuel prices have soared about 24 percent since Labor Day and are now 55 percent higher since January, when Delta fought off a hostile takeover attempt by US Airways Group (Charts, Fortune 500), arguing that such a combination would run afoul of antitrust regulators and not be a benefit to the airline, its employees or its passengers. A spike in jet fuel prices in September 2005 sparked bankruptcies at both Delta and Northwest Airlines (Charts, Fortune 500). Most of the U.S. airline industry has filed for bankruptcies since the Sept. 11 terrorist attack, Since Delta fought off the US Air bid, it has gotten a new CEO, Anderson, a veteran of Northwest and Continental Airlines (Charts, Fortune 500), who has spoken far more positively about the benefits of industry consolidation. UAL executives have long been on the record in favor of mergers in the industry. Link to comment Share on other sites More sharing options...
GTFA Posted November 15, 2007 Share Posted November 15, 2007 And in the meantime the US Air pilots are running for the bunkers. USAPA anyone? GTFA Link to comment Share on other sites More sharing options...
CAT3DUAL Posted November 15, 2007 Share Posted November 15, 2007 YUP! Mergers work! Link to comment Share on other sites More sharing options...
Johnny Posted November 15, 2007 Share Posted November 15, 2007 Welcome to reality. Airline mergers have happened....before...and will happen...again. Link to comment Share on other sites More sharing options...
W5 Posted November 15, 2007 Share Posted November 15, 2007 Delta and United deny talks on proposed merger http://www.iht.com/articles/2007/11/15/business/air.php Link to comment Share on other sites More sharing options...
deicer Posted November 15, 2007 Share Posted November 15, 2007 Welcome to reality. Airline mergers have happened....before...and will happen...again. What mergers??? There's only been takeovers Link to comment Share on other sites More sharing options...
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