Carriers Dispel Reports Fueled By Unnamed Source, Hedge
ANN REALTIME UPDATE
11.14.07 1950 EST: Don't believe everything an
unnamed source tells you. That's the message officials at
Delta Air Lines and United Airlines had late Wednesday, regarding a
report by The Associated Press the two airlines were in talks to
"There have been no talks with United regarding any type of
consolidation transaction and there are no such ongoing
discussions," Delta CEO Richard Anderson told The Los Angeles
Times, echoing similar statements from United.
The AP based its story on statements made by an unnamed
executive, which described a combined United-Delta airline carrying
forth under the United name, with headquarters in Chicago and an
operations center in Atlanta. The source said both sides expressed
a "sense of urgency" to the talks.
"We do not respond to wholly inaccurate statements made by
people who claim to have knowledge when they clearly do not,"
United spokeswoman Jean Medina pointedly told The Times.
Those statements would seem to contradict, at least partly, a
statement made by Delta earlier this afternoon... in which the
airline said it formed a special committee to "review and analyze
That declaration was in response to a letter sent by investment
hedge fund Pardus Capital Management, which owns shares in both
Delta and United, urging the two sides to join forces.
So... were we duped? Is this all a news story planted by a
scheming team of shareholders?
Or are the reports true...?
Just in time for the
holidays, comes the latest round of "merger mania" among two of the
nation's largest airlines. UAL Corp.'s United Airlines is in
serious discussions with Delta Air Lines to merge operations,
according to The Associated Press.
If those talks bear fruit -- and that's still a big "if" -- the
single carrier would keep the United name, and be headquartered in
Chicago, according to the AP report.
An unnamed official with knowledge of the proceedings says talks
between the two airlines -- the second- and - third-largest
carriers in the US -- have been underway for awhile, and continued
as recently as last week.
Both sides also feel they're under the gun, as it were,
according to the source.
"They want to get something done before a new administration
gets in and so they get the clock ticking on" regulatory approval,
the official told AP.
Exact details about the rumored move are unclear, though the
official said the single-airline's operational center would be
located at Delta's current Atlanta, GA hub, and current Delta CEO
Richard Anderson would be CEO of the combined airline.
Current United CEO Glenn Tilton has made no secret of his intent
to merge United with another carrier. Talks of a possible
United/Delta merger, however, come as a surprise to many... who
thought Delta stood a better chance of merging with Northwest
Airlines. Anderson is a former NWA chief executive.
At least one shareholder in both Delta and UAL believes a merger
would be a good deal for the carrier, as it would help ease the
threat of record fuel prices.
"We believe it is imperative that you seek to enter into a
merger transaction with another carrier given the rapid rise in
fuel prices and the increased risk to the business as a stand-
alone entity," wrote Karim Samii and Shane Larson -- the president
and a principal investor, respectively, in Delta shareholder Pardus
Capital Management LP -- in a letter to Delta's management.
Bloomberg reports Pardus owns seven million shares in Delta, and
5.6 million shares in United. The proposal is intended to urge the
carriers to either combine forces, or dump assets, in the face of
record oil prices. The cost of Jet A has surged 51 percent in 2007,
according to the report.
An evaluation of merger options was conducted for Pardus by
former Continental Airlines CEO Gordon Bethune and other industry
analysts, who determined a Delta/United combination presented a
more favorable alternative and route structure than a Delta/NWA or
For the moment, no one at Delta or United is commenting on the
While such a combination may make sense on paper, it's unclear
what impact on morale such a merger would have among employees at
Delta -- who banded together to successfully repel a hostile
takeover by US Airways just last year.
Stay tuned. This may get interesting.