Business Administration Education Guide

Wednesday, November 15, 2006

US Airways Bids $8 Billion for Delta

New York Times

US Airways said today that it has offered to acquire Delta Air Lines, now under bankruptcy-court protection, for $8 billion.

The combined company would become the largest airline in the United States, eclipsing American Airlines, and would be the largest trans-Atlantic carrier as well.

US Airways said the merger would save at least $1.65 billion in operating costs each year by combining facilities at some airports, eliminating overlapping flights and cutting capacity by about 10 percent.

Many analysts have been saying for years that the United States airline industry suffers from overcapacity. Several of the largest carriers have touched down in bankruptcy court in recent years, with Delta and Northwest Airlines seeking protection on the same day last year. US Airways itself has filed for bankruptcy protection twice.

Both airlines have had problems in recent years with their labor unions, principally the Air Line Pilots’ Association, whose resistance to pay cuts and other concessions was an important factor in forcing Delta into bankruptcy. And both have struggled to cope with low-price competitors like JetBlue and Southwest.

Mr. Parker said he was confident that the proposed combination would pass muster under antitrust laws, though US Airways and Delta are the operators of the two rival shuttle services in the intensely competitive Boston-New York-Washington corridor. Mr. Parker suggested that the combined airline could simply sell one of the shuttle operations to satisfy regulators. “There are no antitrust issues that can’t be resolved,” he said.


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