Merger Talks Fly in UAL’s Wake
Fresh signs emerged Wednesday that U.S. airlines are scrambling to respond to the proposed combination of United Airlines and US Airways, but the latest talks may only increase the chances that any merger deals would get a cold reception from regulators, analysts said.
“The question for consumers and the public is whether the deals get through at all,” said Albert Foer, president of the American Antitrust Institute in Washington.
AMR Corp.’s American Airlines and Delta Air Lines Inc. met in New York this week to discuss a competitive response to the planned $4.3-billion buyout of US Airways Group Inc. by United Airlines parent UAL Corp., a source familiar with the situation said Wednesday.
If their response is a merger agreement, the transaction would combine the second- and third-largest carriers in the nation, creating an airline 30% bigger than the combination of United and US Airways--which are now the largest and sixth-largest U.S. carriers.
Analysts and industry observers say an American-Delta deal is even less likely to win regulatory approval than an acquisition of Northwest Airlines Corp. by AMR. Sources said this week that such a deal was proposed by American in a meeting with Northwest.
Not only has the United-US Airways proposal apparently sent U.S. airlines looking for a way to respond, it has coincided with stepped-up merger activity in Europe. On Wednesday, British Airways and KLM Royal Dutch Airlines said they were in talks that could lead to a merger.
Neither side would say whether the ultimate destination of the talks is to be an alliance, a merger or a takeover. But since British Airways is four times larger than its Dutch competitor in terms of market value, any corporate marriage probably would lead to British control, analysts said.
The specter of an American-Delta deal would “add fuel to the fire of regulatory concern,” PaineWebber analyst Sam Buttrick wrote to clients Wednesday. He called the prospect of a merger agreement between American and Delta “exceptionally unlikely.”
Airline analysts have suggested the most likely scenario, based on route networks, would result in American buying Northwest and Delta buying Continental Airlines Inc.. But observers also say such a package of deals, turning the top six airlines into three, stands a strong chance of being blocked by regulators.
In New York Stock Exchange trading Wednesday, AMR rose 13 cents to close at $28.44; Delta gained $1.61 to close at $52.50; UAL added 6 cents to close at $55.06; US Airways rose 25 cents to close at $40.38; and Continental advanced 19 cents to close at $47. Northwest rose $3.25 to close at $35.25 on Nasdaq. U.S. shares of British Airways rose 38 cents to close at $59.94 on the NYSE.
