Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

The Seattle Times

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published Thursday, November 15, 2007 at 12:00 AM

E-mail article     Print view

United, Delta merger talks denied

United Airlines and Delta Air Lines have been discussing a combination between the nation's second- and third-largest carriers that would...

The Associated Press

ATLANTA — United Airlines and Delta Air Lines have been discussing a combination between the nation's second- and third-largest carriers that would keep the United name and the corporate headquarters in Chicago, The Associated Press has learned.

But Delta issued a statement denying "published reports that it had engaged in merger talk with United." CEO Richard Anderson was quoted as saying, "There have been no talks with United regarding any type of consolidation transaction and there are no such ongoing discussions."

United called the report of recent talks "wholly inaccurate."

However, on Oct. 12, 2006, then-Delta CEO Gerald Grinstein said during a stop in New York that he had previously received "feelers" from United about a possible merger.

The Wall Street Journal's online edition, citing unidentified people, said Anderson has informally talked about consolidation possibilities with counterparts at other airlines, including senior executives at United and Northwest Airlines.

Looking at options

Earlier Wednesday, Delta said that its board has established a special committee to work with management to review and analyze strategic options for the airline. Top executives have said they are trying to determine whether consolidation makes sense for Delta.

There is a sense of urgency in the most recent talks, which have been going on for some time and continued as recently as a week or so ago, an official with knowledge of the talks said Wednesday.

The official spoke on condition of anonymity because the person was not authorized to speak publicly. The official stood by the assertions about the talks after learning of the statements by Delta and United.

"They want to get something done before a new administration gets in and so they get the clock ticking on" federal regulatory approval, the official said.

The exact financial details of the transaction being discussed are not clear. But the talks involve United being the name of the combined airlines, the headquarters staying in Chicago and Delta's Atlanta hub being an operational center for the two carriers, the official said.

One possible scenario involves Delta's Anderson being the chief of the combined airline, the official said. Glenn Tilton is now the CEO of United.

advertising

Delta also has had talks with other airlines, the official said, without specifying which airline or the status of any such talks.

Shares of Delta rose 77 cents, or 4.1 percent, to $19.52 in trading Wednesday while United shares gained 67 cents, or 1.5 percent, to $44.17.

When Anderson was named in August as Delta CEO to replace Grinstein, there was speculation in the investment community that Delta and Northwest might eventually merge. Anderson is a former CEO of Northwest Airlines.

Delta's statement Wednesday was responding to pressure by a hedge fund that owns 7 million Delta shares to consider combining with UAL.

Pardus Capital Management said in a letter to Deltathat it is "imperative" that the company undertake a merger transaction with another airline in view of soaring fuel prices and what it described as the increased risks of going it alone.

"Consolidation is needed to de-risk the industry and time is of the essence as now is the right regulatory environment," said Karim Samii, president of Pardus, and Shane Larson, a principal.

"Attractive" combination

The hedge-fund executives said they had determined since making a similar recommendation in a Sept. 7 letter that "the most attractive and practical combination would be a Delta and United Airlines combination."

It cited figures from a consulting firm estimating that the benefits of such a pairing would be about $585 million and said a combined Delta-United would boast a broader network than any other combination.

Pardus also owned 5.6 million shares in United as of Sept. 30.

Pardus executives said a Delta combination with Northwest would produce even bigger benefits of about $1.5 billion, primarily from combining the smallest hubs — Detroit/Cincinnati and Memphis/Atlanta.

"However, Northwest may not enable Delta to complete the breadth of network that business travelers require, resulting in the need for a potential follow-on transaction at a later date in order to achieve the same breadth of network that [United] would provide out of the box."

Associated Press reporter Dave Carpenter in Chicago contributed to this report.

Copyright © 2007 The Seattle Times Company

NEW - 12:18 AM
Microsoft CFO to exit after tough year of cost-cutting

St. Louis exec now boss of all Boeing giving

Saab's fate uncertain after deal collapses

Reform won't take bite out of health-care profits

Facebook's new share structure hints at public offering

Advertising

Video

New Beginnings Christian Fellowship
Coming in this Sunday's Pacific Northwest Magazine: Pastor Braxton's mission is to preach a message that appeals to everyone.

PNW Magazine | Easy As Pie
Real Salt Lake wins MLS Cup
Raw Video | Real Salt Lake fans celebrate
Raw Video | Real Salt Lake receives the MLS Cup trophy
Raw Video | MLS Cup Opening Ceremony
Real Salt Lake fans enter Qwest Field
LA Galaxy's David Beckham
Real Salt Lake's Kyle Beckerman
MLS trophy arrives in Seattle

Marketplace

Open Houses

Find this weekend's open house listings.
Or search by location:

nwautos

Less is more: Group rides, good gas mileage have led to a scooter swarm in Seattlenew
Local riders say they've seen a surge in scooter interest in recent years, mostly from people wanting another commuting option. Seattle now ranks as o...
Post a comment

 
Most read
Most commented
Most e-mailed
 
 
Advertising