DELTANORTHWEST Air lines? UnitedContinental? AmericanUSAir?
You may soon have to learn some new airline names.
Stung by high jet fuel prices and worried about what a recession will do to their businesses, the nation’s flyboys are considering a lot of different formations.
Like you, I’m tired of all the bad things people have been writing and saying about stocks. (OK, guilty as charged.)
So as a change of pace I reached out to sources in the mergers and acquisitions business and they tell me that the airline industry may soon give Wall Street what it wants – action!
Airlines are on the verge of devouring each other.
This isn’t a story about one successful business expanding through the acquisition of another.
Nope! The same recessionary forces that are affecting everyone else are behind the mergers that are now being contemplated by air carriers.
Only the situation is a bit more urgent since airlines – unlike other businesses – can’t just lop off headcount and keep operating. The biggest problem, of course, is the price of jet fuel.
And charging passengers $25 for an extra piece of luggage and five bucks for using the little fan over each seat (calm down, I just made that one up), isn’t going to cure airlines’ ailing profit margins.
So deals are being considered, especially the combination of Delta Airlines with just about anyone, but especially Northwest.
“If Delta and Northwest do a deal,” says a source close to the airline industry “then you are potentially going to see a chain reaction.”
Delta, which exited bankruptcy last April, has already admitted it is speaking with Northwest and United.
And its creditors committee turned down a deal from US Airways when it was still under court protection.
A deal between Northwest and Delta is the most likely.
The experts say that regulators would be more reluctant to let Delta, which is No. 3 in the industry, merge with United, the sec ond biggest, than with No. 5 Northwest.
Are you memorizing the numbers? There’ll be a quiz later.
Continental is said to see United as a potential partner, if United doesn’t do something with Delta.
And American Airlines, the nation’s biggest, could scoop up US Air just so it isn’t left out of the action.
And if not US Air, American might expand its current arrangements with British Airways. It’s all quite frantic.
“You are likely to see a lot of activity in that sector over the next 60 days,” says the source.
If jet fuel prices don’t relent maybe this’ll be the slogan a couple of years from now: “Fly UnitedAmericanUSAirNorthwestDelta – the nation’s only airline.”
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Put this in the category of “How stupid can our government be?”
The US Energy Department said this week that it would fill the nation’s Strategic Petroleum Reserve at a rate of 125,000 barrels of oil a day between May and September.
What, the government is afraid the price of oil has fallen too much?
Is the dime a gallon break we’ve gotten on gasoline recently bothering Washington?
Wall Street speculators have been jacking up the price of crude oil for two years now.
The indisputable evidence that the nation’s economy is slowing has taken some of the pressure off the price of oil and gasoline – which, in case you didn’t know it – is a good thing.
Yet the Energy Department seems determined to push prices back up.
Wall Street thanks you. But the rest of us would like to stuff you into a barrel of $100 crude and toss you into the Atlantic.
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Banks have problems. Everyone now knows that.
But there is a concern among those who know banks best that the public doesn’t yet know the extent of the problems.
So watch out when all the sub-prime lenders and everyone that lent money to consumers file their annual reports in the coming weeks.
The real dirt gets dished in something called a 10K, which is the official filing that all companies make annually with the Securities & Exchange Commission.