RICHARD PINKHAM ATLANTA
The pace appears to be accelerating on the merger front, with the US industry expectant that the US Department of Justice will notify United Airlines whether its purchase of US Airways will be allowed on 2 April.
While a wide range of lawmakers, consumer advocates and competing airline executives have called for the United/US Airways deal to be quashed, analysts believe there is better than an even chance the merger will go through. Against this backdrop, American Airlines' attempt to purchase ailing Trans World Airways (TWA) is encountering a few roadblocks and the nation's other major carriers are trying to craft a response.
Although the bankruptcy judge presiding over TWA's sale dismissed Continental and Northwest's attempts at buying parts of the perpetually struggling carrier, there are still new challenges to American's bid. In addition to a rumoured third attempt by the New York-based Global Airlines, which is being roundly dismissed owing to the nature - and result - of its two previous takeover campaigns, another dark horse, Scottsdale, Arizona-based Jet Acquisitions Group, has emerged.
Jet Acquisitions says it intends to bid $900 million (American's bid is for $500 million) for the carrier and pick up its $3.5 billion tab for aircraft leases. It also pledges to make a further $1.7 billion investment in expanding TWA's fleet. Alas, conventional industry wisdom on this too-good-to-be-true offer is that it is just that.
The fact that none of the company's officers are known in the industry is seen as enough to eliminate its bid from serious consideration. All of these developments seem to augur well for the success of American's bid, something that probably will aid industry consolidation in general and United and American's attempt to carve up US Airways in particular.
Assuming that the deals do go through, the domestic aviation landscape will bear little resemblance to today's, as United and American's market-share lead over their next closest competitor - Delta Air Lines - will grow from under 3 points to the 8.9 percentage point mark. Delta chief executive Leo Mullin has said that if the American and United deals proceed Congress must not shut the consolidation window, but should allow the other carriers to undertake their own merger transactions in order to stay competitive. But who would merge with whom?
Delta and Northwest Airlines represents an incompatible coupling, with fleet and labour issues probably rendering it inviable. Delta and Continental Airlines looks like a better fit, but Northwest, whose shareholdings in Continental allow it a veto over any sale of the Houston-based carrier, is unlikely to consent. This is not necessarily the end of the story. Delta and Continental are discussing a transaction that would see Continental purchase the much larger Atlanta-based major.
For his part, Gordon Bethune has said that he does not want a merger with Delta, but that such a response to the United and American transactions would be necessary. Like many others he says the best outcome would be if all the deals were simply scrapped.
Source: Airline Business
