Transportation
Can A Combined NWA & Delta Narrow Losses? (DAL, NWA, CAL)
Published:
Last Updated:
If you were against airline mergers, you might be preaching to the deaf now. Northwest Airlines Corporation (NYSE: NWA) has voted in favor its merger with Delta Air Lines (NYSE: DAL). Delta has also now approved the merger. As part of the terms, Delta will issue 1.25 shares per NWA share. This merger actually brings up many issues in the sector and inside the companies.
Northwest says that more than 98% of the shares outstanding were infavor of the merger. Delta said that approximately 99% of the votescast were for the merger. This leaves the Department of Justice tomake its approval decision. The FAA recently accepted the Delta andNWA plans for a single operating certificate for the combined aircarrier.
The pilots of the carriers approved the merger. There arediscrepancies on which other labor groups have approved the merger,although our most recent data indicates that deals have been reached inmost cases. The International Association of Machinists and AerospaceWorkers is said to be protesting the deal.
Thisofficially takes the handcuffs off of Continental Airlines, Inc. (NYSE:CAL) to do a deal if it wants. It has said it wants to go it alonemost recently after an initial search for a merger partner. Thismerger of NWA-Delta removes the last internal hurdle over the codeshareagreement between NWA and Continental which had previously been inforce. Whether or not Continental tries to do a deal is up inthe air.
The new company will be branded and named Delta and will be based inAtlanta. The combined air carrier will have 390 destinations in 67countries. It will have more than $35 billion inannual revenue, a fleet of nearly 800 aircraftand a workforce of about 75,000.
It also claims that it will have one of the strongest balance sheets inthe industry. Both companies on a standalone basis are expected tolose money in 2008, but estimates vary widely over this for 2009. Some analysts are looking for wide losses and some are expecting profits.Despite what fees can be passed on and what costs can be cut, oil isthe biggest variable and at $100+ hedging the entire projected oil tabwould likely still result in operating losses. This industry is essentially still a work in progress.
Jon C. Ogg
September 25, 2008
Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Get started right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.