Rumors of airline merger, acquisition take to the skiesby Martin Moylan, Minnesota Public Radio
St. Paul, Minn. — The bankruptcy of American Airlines last November triggered a new round of speculation about airline mergers.
News reports indicate Delta Air Lines, the dominant carrier in Minnesota, is studying potential bids for American Airlines or US Airways. Industry analysts and observers differ in their assessment of whether either deal would be struck, never mind win regulatory approval.
The Wall Street Journal has reported Delta, the nation's second biggest carrier, sees itself as a consolidator in the airline industry and is looking at number three American Airlines and number five US Airways as potential acquisitions.
The Journal cited unnamed sources familiar with the matter who "cautioned that these are very early-stage explorations and any deal, if it happens, may not be reached until a year or so from now."
Former Democratic Minnesota Rep. Jim Oberstar believes Delta should not be allowed to acquire American. Oberstar is widely regarded as an expert on aviation and has opposed big airline mergers.
"The result of a Delta-American Airlines merger will be diminished competition, fewer choices for air travelers, higher costs for air travelers and a global mega-carrier," Oberstar said.
A union of Delta and US Airways would also be very bad for competition, especially along the East Coast where there is overlap in the two carriers' routes, Oberstar said.
At this point, Oberstar is afraid regulators would clear either of the rumored Delta deals.
"I would not say it's DOA," he said. "So far, there are troubling signs."
If either rumored Delta deal were completed, Oberstar believes it would hurt air service in the Twin Cities by prompting Delta to scale back service at its hub here in favor of its primary hub in Atlanta.
Delta did not respond to requests for comment.
LITTLE OR NO EFFECT, ANALYSTS SAY
However, other analysts believe either merger would have little or no effect in Minnesota. Both US Airways and American are relatively minor carriers at Minneapolis-St. Paul International Airport. Each carried about 1 million Twin Cities passengers last year. Delta and its regional carriers flew 24 million passengers.
Oberstar does not expect the Justice Department, Department of Transportation or Obama administration to stand in the way of either rumored merger.
But some industry analysts don't see either deal getting done.
"It's going to be very difficult for Delta to acquire either one of these airlines as a whole," said William Swelbar, a researcher at the Massachusetts Institute of Technology's International Center for Air Transportation. He expects regulators in the U.S. and Europe would be concerned about the affect on competition, especially if Delta were to acquire American.
"If the Obama administration was concerned about a combination of number two AT&T and number three T-Mobile," Swellbar said, "my guess is they would be concerned about a number two Delta acquiring the third largest airline."
A THIRD OPTION
American and US Airways could have plans of their own, too.
Airlines are still intent on merging but the combinations aren't certain, said Darryl Jenkins, chairman of the American Aviation Institute, a thinktank focused on aviation policy.
For certain, however, American doesn't see itself as a take-over candidate, Jenkins said.
"They want to remain independent. They're Texans," Jenkins said.
US Airways is pretty independent-minded, as well, he said.
"I think US Airways has their own plan for world domination. I think they would more likely want to be an acquirer than acquired," Jenkins said. "We know they made a bid for Delta before. As to my prediction, I just don't have a clue."
Some industry analysts say it is difficult to take the speculation about Delta's merger hopes seriously.
"The whole thing is so hypothetical it's almost not worth commenting on," said Michael Boyd, an airline industry consultant. "Nothing can be done at American Airlines by another carrier for at least 18 months."
Analysts say American has structured its bankruptcy in a manner that protects the airline from being acquired as it reorganizes.
- Morning Edition, 02/01/2012, 7:20 a.m.