Wednesday, November 15, 2006

US Air and Delta getting into bed together

Bloomberg: US Airways Proposes $8 Billion Delta Air Takeover

Nov. 15 (Bloomberg) -- US Airways Group Inc. made an $8 billion offer for bankrupt Delta Air Lines Inc. in a transaction that would create the world's largest airline. US Airways disclosed its bid today after Delta Chief Executive Officer Gerald Grinstein last month declined to enter into talks. Delta's creditors would get $4 billion in cash and $4 billion in stock in US Airways, formed 14 months ago by exiting bankruptcy in a merger with America West Holdings Corp. A merger would vault the combined company past AMR Corp.'s American Airlines as the world's biggest carrier, uniting the third-largest U.S. carrier, Delta, with seventh-biggest US Airways. The tie-up would take advantage of airlines' recovery from more than $40 billion in losses from 2001 through 2005. ``This would be a very sensible move, but fiendishly complicated,'' said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia-based consultant. ``Complicated by issues of seniority, culture, fleet, route networks -- and that's just scratching the surface.''

Since I'm pressed for time, I'm just going to restate what I commented on earlier:

So the plan is for USAir and Delta to merge so that two years from now they can plunge into bankruptcy together?

The airline business, in general, is a big black hole for public and private capital. Aside from farmers, nobody beats airline executives for pissing and moaning about a thousand factors beyond their control that inhibit their ability to make money. Inevitably, they wallow up to the government trough with their hands out.

I guarantee that if today some whiz kids invented safe, reliable teleporters just like on "Star Trek" and revolutionized the world with inexpensive, instananeous transit of passengers and cargo, the very next day the airlines would be lobbying the U.S. Congress for tax breaks, and a big fat bailout package to stay afloat in the face of this new threat to their status quo.

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