They don’t have overlapping markets? What are you talking about? They operate on a hub system and connect flights to many overlapping cities. When you have hubs close together like Cincinnati and Detroit then one of them gets cut out.
I chose 2 aircraft of comparable size for a reason. If both carriers have over capacity then merging them better utilizes the aircraft. And without cutting a single flight out there is a savings when aircraft are allocated based on fuel efficiency. Longer routes get the more efficient aircraft.
Shirley you understand that the institutional shareholders are the ones ponying up the money to keep this train wreck in the air. And their business is not employing pilots or ensuring pleasant on time flights. Their business is increasing the value of their assets. If the airline business didn’t offer them such an opportunity they would take their money else where. And then there wouldn’t be any non-goverment airline companies at all.
I am not naive to think the new combined airline will actually do what it promises.
I do think this is a golden opportunity for the media and blogs to watch this entire plan unfold during the next year or two, keeping detailed notes and copies of the respective web sites and news releases (never rely that the airline web sites won’t be purged and manipulated by the airlines themselves as reality sets in).
Oh, yes I know. Some Swiss investment bank last Friday made a rather timely change in the valuations of the stock in both companies from a hold to a strong buy in anticipation of the merger announcement. Someone can make quite a bit of money on this merger push, even if it is later derailed by regulators or Congress.
The boards have agreed to merge - everybody else has issues. And the merger hasn’t gotten FTC clearance.
As for NWA - ack! The suck in pretty much every category - on time arrivals, baggage loss, customer satisfaction.
And the there is the ancient DC-9 fleet, the same type that Delta ditched years ago because of efficiency and maintenance issues.
And I don’t quite get it - what exactly is the gain in the merger? It’s not like the two airlines were competing that much. I imagine that any savings brought on by a merger will be eaten up by rises in fuel, maintenance and oh yes, buying new aircraft to replace the DC-9s.
And there’s your basic reason why Wall Street doesn’t like this deal at the moment. That and the equation of ‘how hard is it going to be to do this?’ vs. ‘How much money could they save?’
Addressing the Hub closure thing, as expressed above, and by Marley23, they will not “close” Hubs. Unfortunately, CVG and MEM will probably be “right sized”. DTW will serve most connections that used to go through CVG, likewise for ATL versus MEM.
The other “synergy” is to dispose of planes. If the merger goes through, look for any “legacy” aircraft (DCthis, DCthat) to get flown on a one way trip to Mojave.
The scary thing to consider in all this is what UA and CO will do.
I promise not to call you Shirley but I’ve been in the air freight business for 26 years. There’s nothing more fun than a good ole fashion merger. Step 1: promises are made that nothing will change. Step 2: everything is changed.
The DC9 is the aviation equivalent of a 70 Nova with a 396. The gas mileage sucks and it’s not that roomy. It’s an anchor around NW’s neck.
The hub system is based on strategically located connecting points. By default there will be competing hubs close to each other. Some of these hubs will not be needed.
I suspect the deal will win regulatory approval but I’ll make no claims as to the unions.
I heard a telling statistic on NPR this morning, the two airlines share only 12 non-stop city pairs currently and all of these pairs are well serviced by other airlines including discount airlines.
I don’t think the move would have a tremendous effect on the competitive marketplace we should allow them to merge if they really think it will save them money.
It’s a stupid merger. With the NWA POS DC-9s mothballed, Delta2 will then have to either eat debt buying new planes or reduce service while maintaining the existing joint flight schedules or resect some of the joint schedule to reflect the non-DC-9 fleet capacity.
And what about the pilots? All those misaligned pilots, including the DC-9 certified-but-not-Boeing-or-MD-certified pilots? They’re going to RIF a bunch of people, service will suck, and any and all benefits will be eaten away by unrelenting fuel costs, fleet debt, infrastructure debt, buying/RIFing people debt.
All for a weaker, crappier version of the current Delta.
Stoooooooooooooooooooooopid.
It sucks to be NWA, but damaging Delta isn’t the way to go.
It’s very simple. Markets that are underutilized by both carriers will combine. A city that may have 9 flights between them over the course of a day may be reduced to 7. The DC9 fleet will be phased out over time starting with the 30’s and then eventually the 40’s. This is a natural process and is easier to do when the load factors are increased after the merger.
What about the pilots? Both companies are losing money. There are more flights than there are people to ride in them. The market has to react to it or both companies face closure. DC9 pilots know the plane is a dinosaur. Senior pilots would transition to other aircraft as slots open up. It’s not like they have to retire with the plane. The initial merger will certainly eliminate flights and jobs but that is inevitable in a bloated market.
NW has a substantial passenger/cargo presence on Pacific routes. Adding this to Delta increases market share. But it’s not market share that will save the companies. The whole point of the merger would be to increase aircraft load factors. By combining their routes they will be able to eliminate underutilized aircraft.
If the problem is excess capacity, then the proper solution for Delta is to downsize without adding on merger debt and a surplus of pilots who are for the most part not even certified to fly the aircraft used by Delta. Delta is better off downsizing without eating the debt and chaos induced by a merger with an airline that is pretty much inferior in any dimension - Arrival/Departure Timeliness, Fleet Age/Efficiency, Customer Satisfaction.
If NWA can’t manage its problems without a merger, then it should cease to exist - NWA brings nothing of value to the table, only obsolete aircraft and yet more pilots that Delta cannot support. If there is more airline capacity then demand, then the answer is for NWA to downsize or shut down. Dragging Delta into it threatens the value of Delta stock.
It’s better to let NWA die without compromising Delta, and then let Delta compete for a share of the demand freed up by NWA’s demise. This could happen without Delta having to subsidize NWA’s aged fleet and surplus pilots.
I think Delta has the same reasoning you do, but they don’t feel like waiting for NWA to spiral down the drain. By merging with NWA, Delta will have more flights to more places, even while reducing the supply of air travel and increasing the amount they can charge, and to top it all off they won’t have as much competition. NWA has enough momentum to continue operating for a long time, and getting them out of the picture will probably turn out to be a good business decision.
Both airlines are struggling in a competition with each other. One may be more financially viable than the other but they’re both struggling. I guess you could write a letter to the stockholders of NWA convincing them to roll over. Best of luck.
Mergers are not done for the consumer. They will eliminate jobs and will have more control over prices. They will cut routes and flights if they choose to. There is less competition to force them to do anything l. It is anti competition. That makes it anti capitalism.
