According to AP United Airlines and Delta Air Lines have been discussing a combination between the nation’s second- and third-largest carriers that would keep the United name and the corporate headquarters in Chicago. Shares of both airlines surged on the news. There is a sense of urgency in the talks, which have been going on for some time and continued as recently as a week or so ago, an official with knowledge of the talks said Wednesday. The official spoke on condition of anonymity because the person was not authorized to speak publicly.
“They want to get something done before a new administration gets in and so they get the clock ticking on” federal regulatory approval, the official said.
The exact financial details of the transaction being discussed are not clear. But the talks involve United being the name of the combined airlines, the headquarters staying in Chicago and Delta’s Atlanta hub being an operational center for the two carriers, the official said. One possible scenario involves Delta CEO Richard Anderson being the chief of the combined airline, the official said.
Delta also has had talks with other airlines, the official said, without specifying which airline or the status of any such talks. They said in a statement Wednesday that its board has established a special committee to work with management to review and analyze strategic options for the airline. Top executives have said recently they are trying to determine whether consolidation makes sense for Delta.
Delta’s statement Wednesday was responding to pressure by a hedge fund that owns 7 million Delta shares to consider combining with UAL. Pardus Capital Management LP said in a letter to Delta’s top management on Tuesday that it is “imperative” that the company undertake a merger transaction with another airline in view of soaring fuel prices and what it described as the increased risks of going it alone.
“Consolidation is needed to de-risk the industry and time is of the essence as now is the right regulatory environment,” said Karim Samii, president of Pardus, and Shane Larson, a principal. Pardus also owned 5.6 million shares in Chicago-based UAL as of Sept. 30.
Source: AP, aviation.com