Are United and Delta talking merger?

Tail fins of United, Delta planes

TEXT OF INTERVIEW

KAI RYSSDAL: Twenty-seven-million people are expected to fly to get where they're going this Thanksgiving. That means airplanes will be more full than usual. And there was some interesting aviation news today that could lead to ever-more crowded skies for passengers. Rumors of a merger between Delta and United. Delta CEO Richard Anderson issued a statement later this afternoon denying the whole thing. But before that denial hit the wires we talked with Julius Maldutis. He runs the consulting firm Aviation Dynamics.

Julius Maldutis: Delta is a dominant carrier across the North Atlantic, whereas United has been extremely successful across the Pacific. So that combination will provide a very strong power to a global-international system. Obviously, also, is this going to precipitate mergers among other U.S. carriers? What is Northwest going to do? What is Continental going to do? Is American Airlines going to do something? That's going to be a very interesting situation to think about.

RYSSDAL: You know, one of the things that happens when there's a big merger is consolidation. And they stop running all the flights that they would ordinarily run. I don't know if you've been on a plane lately, but the last thing it seems to me that we need is fewer flights in the air, right?

Maldutis: Well, the industry today is very highly competitive. And I think it's important to recognize that this combination between Delta and United would result in some cutback on flights on certain routes. But I think it would provide tremendous opportunities for the smaller companies to expand. And I think the intriguing question, obviously, is, "Is this combination going to precipitate not only consolidations and mergers among the other major carriers, but is it also going to encourage the small companies to combine?

RYSSDAL: What do you think the folks at the regulatory agencies are thinking as they read the news today?

Maldutis: I think they're going to be very interested. It's going to be a great Thanksgiving to think about. And there's going to be a lot of discussions over Thanksgiving.

RYSSDAL: What are the challenges to getting a deal like this done? I mean, it's no easy thing.

Maldutis: It's no easy thing. I think, obviously, to have the financings arranged ... In my opinion the critical piece is obviously having organized labor backing it. That's going to be the key element. Because, keep in mind, that there was a proposed acquisition by USAir of Delta, and the employees at Delta were bitterly opposed to it. And that's why that merger couldn't go forward.

RYSSDAL: How is it better for passengers if the number two and three carrier in this country get together?

Maldutis: Well, in terms of being direct service, improved service at both companies. So, to some extent passengers would benefit by a combination. But it really is ... the key issue right now as far as passengers are concerned is what's going to happen to fuel prices. Because that's going to determine what happens to airline tickets.

RYSSDAL: That was Julius Maldutis of the consulting firm Aviation Dynamics. Investors were fooled by the timing of the rumor leak and the denials from Delta, too. United shares rose about 20 percent as the news hit. Delta was up 25. By the bell Delta was up a much more modest 4 percent; United a percent and a half.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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