Transcripts

Can A US Airways/ Delta Merger Really Take Flight?

SUSIE GHARIB: A big hostile takeover bid in the airline industry today. U.S. Airways offered $8 billion in cash and stock for rival Delta Airlines and shares of both companies surged on the news. Delta, now in bankruptcy, has told U.S. Air it isn't interested in a merger. But if the deal is completed, the airline would operate under the Delta name and would be the nation's largest carrier. Stephanie Dhue reports.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Combined, U.S. Airways and Delta would be the nation's largest airline, reaching more than 350 destinations around the globe. Analysts say the deal would position the combined carrier as a major player in the domestic and international market.

MARK KIEFER, AVIATION CONSULTANT, CRA INTERNATIONAL: Perhaps the U.S. Airways CEO Doug Parker sees this as an exercise perhaps of musical chairs, if you will and doesn't want to be caught without a chair when the music stops, as it were. And that might explain this first foray into what could be potentially a round of further consolidation in the industry.

DHUE: Delta says it is not for sale. In a brief statement, CEO Gerald Grinstein said quote, Delta's plan has always been to emerge from bankruptcy in the first half of 2007 as a strong stand-alone carrier, end quote. But Delta's unsecured creditors will likely have the final say. Making this merger work will be challenging. Airline mergers generally have a history of running into turbulence from unions and regulators.

CLIFF WINSTON, TRANSPORTATION ANALYST, BROOKINGS INSTITUTION: I don't think anyone can point to the airline industry and say the secret for success is merging. This is just a strategy at this point that I still would claim is quite risky.

DHUE: The machinists union is already raising concerns about any new deal. In a statement saying quote, if U.S. Airways hopes to complete a successful merger with Delta or any other airline, they must first conclude the ongoing negotiation regarding the integration of America West employees into U.S. Airways, end quote. The announcement set off speculation that this is the beginning of a new round of consolidation for airlines and that more bidders will emerge for Delta.

PHILIP BAGGALEY, AIRLINE ANALYST, STANDARD & POOR'S: UAL has indicated an interest in consolidation, although their main interest is in Continental. Northwest Airlines is also in bankruptcy. Its route system fits rather well with that of Delta and they've been a rumored marriage possibility. Even Continental, which at one time some years ago, was a target of Delta's acquisition bid, there might be a reverse bid there.

DHUE: A merger of U.S. Airways and Delta would have to get regulatory clearance from the Justice Department. U.S. Airways says it would jettison overlapping shuttle routes in the northeast to get the deal done. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.