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Fri, Nov 17, 2006 - Page 10 News List

US Airways' bid for Delta could trigger air war


US Airways made a hostile US$8 billion bid for Delta Air Lines on Wednesday, ignoring Delta's repeated statements that it wasn't interested in a merger. The move could start a stampede of competing bids in a long-predicted industry consolidation.

Analysts said United Airlines' parent company may make its own move to acquire Delta, and takeover bids for Northwest Airlines, which like Delta is being reorganized in bankruptcy court, can't be ruled out.

They also questioned whether US Airways could complete its plan to create the US' largest carrier, even after a planned 10 percent cut in capacity, on the compacted timeline it is seeking.

"My main question mark is if the politicians and regulators would allow it to happen, because if it did it would probably set off a trend for industry consolidation," Ray Neidl, an airline analyst with Calyon Securities in New York, said of a Delta-US Airways combination.

It also could lead to higher ticket prices for passengers, industry experts said.

"With a capacity reduction of 10 percent, fares are going nowhere but up,'' said Robert Mann, a New York-based airline consultant.

Delta said its goal remains to be a stand-alone company when it emerges from bankruptcy and that it had the backing of its creditors committee when it declined earlier discussions with US Airways. It has yet to file its own plan of reorganization, but has the exclusive right to do so until Feb. 15.

If the deal is completed, the combined airline would operate under the Delta name and serve more than 350 destinations across five continents. The combined company would divest certain assets, including one of the two hourly shuttle services that Delta and US Airways operate between Boston, New York and Washington. US Airways has not decided where the combined company would be based.

The US Airways offer comes as it and America West are still integrating their operations after their combination last year.

The deal also comes with a host of labor-related complications, according to Mann.

"There will be a huge seniority integration problem that will result. It's already problematic after the US Airways-America West merger. This will only increase it fourfold," he said.

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