US Airways offers to buy Delta - what will it mean?

[MrsToad]

Good morning. CNN is reporting that US Airways is offering to buy Delta when it comes out of bankrupcy. What will that mean for Delta ticket holders (both cash and ff mile tickets), and for existing Delta customers who have unused ff miles?

Will such a merger contribute to stability in the industry?

Thanks!

 

[HopperFan]

Report I heard was it would not occur until Delta comes out of bankruptcy. Am sure we will get the PR letter soon from Delta about our miles........but wondering if we should go ahead and book our FF tickets.

 

[rgf207]

This is directly from a U.S. Airways email I got today

A much larger network of routes and frequencies to simplify your travel
A history of reducing fares and eliminating unfriendly fare rules like Saturday-night stays
A global frequent flyer program that would combine your Dividend Miles and Delta SkyMiles balances
Participation in one of the world’s largest airline alliances, opening up even more of the world for your travel
Peace of mind that you are building a travel rewards investment in a company that will be here for the long term, and that your miles will be here when you’re ready to redeem them

 

[Miss Jasmine]

At this point it means NOTHING, and I honestly believe it will continue to mean nothing. US Airways has been courting Delta, and sent the Delta CEO a letter on September 29, 2006. Mr. Grinstein at that time declined to discuss this possibility with US Airways.

US Airways made this announcement publically to let Delta stockholders know what is being offered in hopes that the stockholders put pressure on the Delta board and staff.

I just don't see anything coming of it.

 

[Horace Horsecollar]

What will that mean for Delta ticket holders (both cash and ff mile tickets), and for existing Delta customers who have unused ff miles?

Will such a merger contribute to stability in the industry?

If/when the merger goes through, the combined airline will make massive changes to its route structure and schedule to achieve economies of scale and to eliminate redundant expenses. For example, it's likely that US Airways' Charlotte hub would be eliminated in favor of Delta's much larger Atlanta hub for connections in the Southeast — despite statements in today's news that the Charlotte hub would remain after a merger.

Delta ticket holders and Delta SkyMiles members won't lose anything, but they may find their flights and connecting cities changed.

Report I heard was it would not occur until Delta comes out of bankruptcy.

Actually, the whole idea is that the merger would need to occur while Delta is still under bankruptcy. The merger would get Delta out of bankruptcy, just as America West's takeover of US Airways got US Airways out of bankruptcy.

The combined airline would use the Delta name, even though US Airways is acquiring Delta. When America West took over US Airways, the combined airline took on the US Airways name.

 

[Miss Jasmine]

If/when the merger goes through, the combined airline will make massive changes to its route structure and schedule to achieve economies of scale and to eliminate redundant expenses. For example, it's likely that US Airways' Charlotte hub would be eliminated in favor of Delta's much larger Atlanta hub for connections in the Southeast.

Delta ticket holders and Delta SkyMiles members won't lose anything, but they may find their flights and connecting cities changed.

Reading through the US Airways documents this is not true:
"Even with a 10 percent reduction in capacity, all existing U.S. Destinations served today by US Airways and Delta will remain part of the new improved network. "

Yes, Charlotte or Atlanta or any other hub may have reduced capacity but no destination is going to be eliminated. The reduced capacity will occur because of network overlap being eliminated.

 

[Horace Horsecollar]

Reading through the US Airways documents this is not true:
"Even with a 10 percent reduction in capacity, all existing U.S. Destinations served today by US Airways and Delta will remain part of the new improved network. "

Yes, Charlotte or Atlanta or any other hub may have reduced capacity but no destination is going to be eliminated. The reduced capacity will occur because of network overlap being eliminated.

Yes, they're currently claiming that Charlotte will not be eliminated as a hub.

When American acquired the assets of TWA, American said that St. Louis would remain a major hub despite American's hub in Chicago. Then American essentially eliminated St. Louis as a hub. (In defense of American, the original plan to keep the St. Louis hub was changed because of the downturn in the airline business, not because American was being dishonest.)

In the long run, it would only make sense for a combined Delta-US Airways to keep the Charlotte hub if the airline business is very strong and Atlanta is at capacity. Otherwise, it will make business sense to route connections in the Southeast through a single hub, and to relegate Charlotte to point-to-point service for city pairs that can support such service, eliminating many of the current nonstops from Charlotte.

Please note that I'm not disagreeing with the statement, "all existing U.S. Destinations served today by US Airways and Delta will remain part of the new improved network." But it makes business sense to serve those destinations from fewer hub cities to achieve a more efficient network with lower operating costs for the combined airline.

 

[Miss Jasmine]

I see what you are saying, and yes that could happen.

Again, though, looking at the numbers, I don't see this merger proceeding. United has been courting Delta as well. I wonder if we'll see anything from it because of US Airways play.

 

[beccasmom]

I think USAirways is biting off more than it can chew, at least in my market (PHL). They continue to have major issues with their luggage system here (although it is supposed to be confined to the international flights at this time, which is bad enough since they hope to expand European routes). Customer service at PHL is mediocre, IMHO. I think they need to concentrate on solving existing problems before adding to them.

I've never used Delta much - they don't have a great schedule to MCO from PHL - but wasn't overly impressed when I did. But it's been a few years.

So much for competition! I hope Jet Blue makes it to PHL soon. Between them and SWA, I would be happy.

 

[safetymom]

Personally I think the merger is a very bad idea. US Airways has been terrible to deal with since the merger with America West. It is still supposed to take another year before the two computer systems can talk to each other.

I asked and received a status match on Delta to get away from the hassle of dealing with US Airways. Now this comes up.

I hope the city of Atlanta steps up and fights this also. US Airways treated Pittsburgh very badly when they decided they didn't want a lot of flights from Pittsburgh. I can imagine what they would do to flights in Atlanta.

I was interviewed for an article today about the merger. Hopefully my comments make it into the New York Times tomorrow.

I say vote NO for the merger.

 

[The Mayor]

To me it means one large screwed up airline instead of two. Everytime I have to fly either US Air or Delta for business it's a nightmare...I swear they are both run by Mo, Larry and Curly.

 

[Miss Jasmine]

I say vote NO for the merger.

I agree. It makes NO SENSE for DELTA at all. NONE. Look at the numbers. Delta is the bigger company, with more assets even in bankruptcy. I hope the creditors tell US Airways to beat it.

 

[MrsToad]

Thanks, everyone, for sharing your thoughts. On the way to work this morning, and then again on the way home tonight, I heard some interesting things on the radio. It is hard to know what is fact and what is the commentator adding his own twist. For instance, this morning on the way in I heard that Delta had come out and said they were not interested, and then later, I heard that US Airways would continue their efforts as it would also be good for the creditors. The commentator said that since Delta had said no, this could be a hostile take-over. Can this happen, and if so, how? Who makes the decision, Delta and its shareholders, the judge, or the creditors?

 

[DebbieB]

You don't have to worry about your FF miles. Anytime a merger like this has taken place, the FF programs were merged. I have my doubts that this will go through. USAirways has still not fully completed the AW merger, they are still operating separate reservation systems. It would be a total mess. United and USAirways had a merger agreement a few years ago and it fell apart. It kills me that they downsized Pittsburgh, left thousands without jobs in favor of Philadelphia, where everytime a raindrop falls it goes crazy.

 

[plutospup]

It makes NO SENSE for DELTA at all. NONE. Look at the numbers. Delta is the bigger company, with more assets even in bankruptcy. I hope all shareholders tell US Airways to beat it.

I'm not sure Delta will have much input into such a decision. Delta's creditors (shareholders), and those involved in the bankruptcy proceedings might have a bigger say. A Delta creditor is interested in the highest return for their dollar. US Airways bid puts money in the creditors pockets, and it's more than what a bankruptcy settlement might offer.

 

[bicker]

Fewer airlines will mean higher fares, which will mean more stability for the airline industry, and make it less likely that we taxpayers will have to take on the burden of yet-another airlines unfulfillable liabilities.

 

[Miss Jasmine]

I'm not sure Delta will have much input into such a decision. Delta's creditors (shareholders), and those involved in the bankruptcy proceedings might have a bigger say. A Delta creditor is interested in the highest return for their dollar. US Airways bid puts money in the creditors pockets, and it's more than what a bankruptcy settlement might offer.

I meant creditors, it was a long, crazy day around here yesterday. I am editing my post now.

 

[CarolA]

As badly as Delta has been run. USAir is WORSE. (USAir is the only airline I know that routinely takes off KNOWING they have left LOTS of luggage behind)

Delta creditors actually get very little say since USAir's "bid" is dependent on DL emerging from Bankruptcy. In other words, USAir is NOT stepping up to pay the mess now, they want to wait for DL to be "cleaned" up to buy it. This also means that the merger is pretty far off.

I really hope this fails, but I am afraid DL is now in play and someone will buy them.

 

[plutospup]

I am afraid DL is now in play and someone will buy them.

I think you hit the nail on the head. It may not be US, but I, too, believe there will be a merger with someone. The vultures are starting to circle.

 

[Miss Jasmine]

Like I said UAL has been sniffing around as well. I just think this is bad for consumers. Yes the burden on the tax payers may not be as much, but we will still be paying in another way. Blech.