Both Delta Air Lines and US Airways
are rumored to be exploring some sort of consolidation with American Airlines. During separate fourth-quarter earnings calls with analysts and media Wednesday, Delta management batted away all questions on the topic, while US Airways CEO Doug Parker confirmed that, yes, the carrier is exploring its options, that nothing is imminent and, although US Airways has long been a proponent of M&A, that the carrier does not "need" to participate in what may or may not be the next round of industry consolidation.
Merger speculation is one of the airline industry's favorite pastimes, and it started anew this week after the
Wall Street Journal reported that Delta Air Lines, US Airways and private equity firm TPG were orchestrating separate bids for American Airlines' bankrupt parent AMR.
Such news reports are catnip to journalists, analysts and airline geeks, but are probably a hassle for the airlines involved, since they "never comment on rumors or speculation." Instead, they leave that up to the experts, so here we go.
We
published in The Beat an interview with US Airways president Scott Kirby that not only echoed American Airlines' view that it should not have to pay global distribution system firms for distributing ancillary services, but did so again and again.
Plagued by high fuel costs, US Airways decided to stop offering one-way fares below certain levels ($69 for flights less than 500 miles and undisclosed minimums on longer flights). In the hypercompetitive domestic U.S. airline industry, will such a fare barrier work? If history is guide, unilateral moves by major U.S. carriers to establish pricing floors, ceilings or redesigns don't generally last long.
