story here A scary thought, but one long predicted by FWAA
American Airlines, the world’s largest airline by total passengers transported, could be a threat to a Delta deal, particularly if it tied-up with Northwest, the banker said. Having taken a hard look at Northwest “years agoâ€, the banker speculated that American could attempt to bust the deal by making a competing offer if and when the deal is announced. Further, a second industry banker said Northwest did not agree to the merger with American in 2000 as the offer did not reflect the full market premium to Northwest’s share price at that time.
Moreover, the first banker noted that American has more practical experience with mergers than any other airline, which could make the top carrier “more courageous†under the right circumstances.
The banker characterized Northwest as American’s logical merger partner, and speculated that it could make a play to cement its position as a ubiquitous business-class carrier and ensure it is not short-changed during consolidation. Other potential combinations could attract the attention of antitrust regulators and are less likely, the banker said. He explained that an American/Delta merger would have significant overlaps in the Southeast; while an American and Continental tie-up could be problematic because of their Texas hubs in Dallas and Houston. Lastly, he noted that United and American would have a roughly 60% market share in the Chicago market because they are number one and two, respectively, making a tie-up unlikely.
To keep its options open to consolidation, American could proactively disrupt a Delta and Northwest combination to safeguard its position as an industry leader. Should Delta choose Northwest as a merger partner, United would likely respond by pursuing Continental, in which case the only legacy carriers not hitched would be American and US Airways - an unlikely pairing because the latter is a low cost, low-fare carrier.
American is likely thinking ahead on the probable tie-ups, the banker suggested. If United merges with Delta or Continental, American will be faced with a “very, very serious problem;†namely that its hegemony with the business traveler will be threatened, the banker said. He added that a United and Continental tie up would put American in hot water, not just because the aggregate market share of the combined entity would be bigger, but because the new entity would be an enterprise that would practically have a hub in the major population centers around the perimeter of the US. This, he said, would be a very effective kind of competitor for American.
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American Airlines, the world’s largest airline by total passengers transported, could be a threat to a Delta deal, particularly if it tied-up with Northwest, the banker said. Having taken a hard look at Northwest “years agoâ€, the banker speculated that American could attempt to bust the deal by making a competing offer if and when the deal is announced. Further, a second industry banker said Northwest did not agree to the merger with American in 2000 as the offer did not reflect the full market premium to Northwest’s share price at that time.
Moreover, the first banker noted that American has more practical experience with mergers than any other airline, which could make the top carrier “more courageous†under the right circumstances.
The banker characterized Northwest as American’s logical merger partner, and speculated that it could make a play to cement its position as a ubiquitous business-class carrier and ensure it is not short-changed during consolidation. Other potential combinations could attract the attention of antitrust regulators and are less likely, the banker said. He explained that an American/Delta merger would have significant overlaps in the Southeast; while an American and Continental tie-up could be problematic because of their Texas hubs in Dallas and Houston. Lastly, he noted that United and American would have a roughly 60% market share in the Chicago market because they are number one and two, respectively, making a tie-up unlikely.
To keep its options open to consolidation, American could proactively disrupt a Delta and Northwest combination to safeguard its position as an industry leader. Should Delta choose Northwest as a merger partner, United would likely respond by pursuing Continental, in which case the only legacy carriers not hitched would be American and US Airways - an unlikely pairing because the latter is a low cost, low-fare carrier.
American is likely thinking ahead on the probable tie-ups, the banker suggested. If United merges with Delta or Continental, American will be faced with a “very, very serious problem;†namely that its hegemony with the business traveler will be threatened, the banker said. He added that a United and Continental tie up would put American in hot water, not just because the aggregate market share of the combined entity would be bigger, but because the new entity would be an enterprise that would practically have a hub in the major population centers around the perimeter of the US. This, he said, would be a very effective kind of competitor for American.
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