Delta Air Lines – US Airways – Looking at American

Delta 737 Taxi's Past American 737 at LIR | DL and US eye AA | Airline News

Delta or US to Merge with American?

The rumors are flying with Dallas based American Airlines in US Bankruptcy Court seeking Chapter 11 re-organization.

Delta Air Lines just finished their merger with Northwest Airlines, but word on the street is they’re looking at American Airlines as the commercial airline industry in the United States consolidates.  There’s been rumors US Aiways and TPG Capital are also looking into a bid at American.  American Airlines is the last of the US legacy carriers to seek Chapter 11 bankruptcy re-organization.

American Airlines and their fleet would nicely compliment Delta’s, unlike the Northwest merger which brought many new aircraft types into the mix.  On the other-hand, US Airways primarily Airbus fleet and American’s fleet of MD-80’s, 737 NG’s, along with the 757, 767, and 777, greatly differs from the fleet US operates.  In fact, it took quite some time for things to smooth out after the America West purchased US Airways and completed the merger under the US Airways name.   Just recently, US Airways announced they’re looking to keep over 99% of their activities at their core facilities of Philadelphia, Charlotte, Washington National, and Phoenix.

With all of the recent airline mergers, another question is will the Federal Trade Commission and Department of Justice let such a large merger go-ahead, and if so, what does it mean for passengers?  In our view, we believe this will significantly eliminate needed competition and result in higher airfares.  However, as this happens, it may make room for a new, or existing budget carrier to expand.

According to the Wall Street Journal, Delta “conducted an antitrust analysis on a possible tie-up with AMR and concluded that with some concessions, such a deal has a good chance of getting approval from regulators.”

We believe there would need to be more than “some concessions”, if the anti-trust regulators are really looking out for the public good.  There’s a significant number of smaller Midwest, mid-south, and Texas airports that only have service from two carriers, in several cases it’s Delta and American. While some industry consolidation was needed, we believe a larger merger with American goes a step too far.

While American is re-organizing their debt and contracts via Chapter 11, they do have cash on hand (no debtor in possession financing was necessary), so the chances of American being sold and cherry-picked are diminished.  While American is sought after, it appears the best outcome would be American Airlines exiting Chapter 11 on its own – this would be best for consumers and employees of American Airlines.

Last, as American Airlines continues its reorganization, rest assured you can buy tickets for travel on American Airlines and aside from merger talk, it’s business as usual.

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