Talks of airline mergers fill the air

June 7, 2000
Web posted at: 3:23 p.m. EDT (1923 GMT)

NEW YORK (CNNfn) - A new round of airline merger discussions was in the air Wednesday as the second- and third-largest carriers in the United States reportedly held preliminary talks on a combination while two major European airlines confirmed talks that could form that continent's largest carrier.

Officials of American Airlines and Delta Air Lines refused to comment Wednesday on a report in the Wall Street Journal that executives of the two had held talks Monday, including very preliminary discussions of a possible combination. Meanwhile, British Airways confirmed it had held talks with KLM Royal Dutch Airlines about a possible combination.

American and Delta together would dwarf any other carrier in the world, with nearly 40 percent of the U.S. market. Their combined 1999 revenue of $32.4 billion would be about 80 percent greater than current leader United Airlines' total for the period.

"I think it'd be a nonstarter," said Susan Donofrio, analyst with Deutsche Banc Alex. Brown, about a possible American-Delta combination. "The size of those two airlines, as well as overlap, makes it prohibitive to (the Department of) Justice. And you wouldn't have a clear leader in terms of the merger. Other deals being discussed, you know who's the buyer. With American and Delta, there would be more fighting."

Merger frenzy sparked by United

United sparked the round of merger discussions when its parent UAL Corp. announced late last month that it has agreed to buy US Airways, the nation's sixth-largest carrier. Neidl said that if another deal is announced within the 60 days after that May 24 announcement, U.S. regulators are likely to consider it at the same time they look at the UAL-US Airways deal, which would be preferred.

"I think that's what they'd want to do, and that's why they're all rushing," said Neidl.

Officials of the Justice Department's antitrust division did not have immediate comment about the review of multiple airline deals.

The Journal's report said the New York meeting between American and Delta included executives one notch below the chief executive level, plus investment bankers and lawyers.

There was more support by analysts Wednesday for a possible British Airways-KLM combination, although that likely would draw antitrust scrutiny on both sides of the Atlantic. It would be the first major cross-border airline deal considered by European regulators.

"They'd be breaking new ground," Neidl said.

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British Air in KLM talks
June 7, 2000

American Airlines
British Airways
KLM Royal Dutch Airlines
United Airlines
Wall Street Journal
U.S. Justice Department

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