Delta Sees More Airline Consolidation as AMR’s Bankruptcy Helps Cut Seats
Dec. 14 (Bloomberg) -- Harvey Miller, a partner at Weil Gotshal & Manges LLP, talks about the bankruptcy restructuring plan for American Airlines parent AMR Corp. and the impact of the U.S. economy on the airline industry. Miller, AMR's bankruptcy lawyer, speaks with Carol Massar on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Dec. 14 (Bloomberg) -- Harvey Miller, a partner at Weil Gotshal & Manges LLP, talks about American Airlines parent AMR Corp.'s bankruptcy plan and its impact on the pension fund, employment and aircraft leasing. Miller, AMR's bankruptcy lawyer, speaks with Carol Massar on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Delta Air Lines Inc. (DAL) Chief Executive Officer Richard Anderson said he expects more consolidation across the global industry through additional joint ventures or traditional mergers.
Consolidation and individual carriers’ cuts in seating capacity have helped airlines trim operating costs, and the Nov. 29 bankruptcy filing by American Airlines parent AMR Corp. (AMR) “is another important step in that process,” Anderson said today at an investor event in New York.
Anderson’s comments echoed remarks last week by US Airways Group Inc. (LCC) Chief Financial Officer Derek Kerr, who said there is “possibly room for more” tie-ups that would bolster industry finances. Delta acquired Northwest Airlines Corp. in 2008, while US Airways combined with America West Holdings Corp. in 2005.
Global marketing alliances such as Delta’s SkyTeam that allow carriers to jointly plan schedules also will play an increasingly important role, as will agreements with antitrust protection that permit coordinated pricing, Anderson said.
“We should expect that consolidation around the world will continue” through such joint ventures of mergers, Anderson said.
Delta was displaced as the world’s largest airline last year when United Airlines (UAL) combined with Continental Airlines Inc. to form United Continental Holdings Inc. Southwest Airlines Co. (LUV), the biggest discount carrier, acquired AirTran Holdings Inc. in May.
Delta ‘Opportunities’
“It’s hard to tell” exactly what American’s bankruptcy will mean, Delta President Ed Bastian said on a webcast of the investor presentation. “There will probably be some opportunities there,” he said without elaborating.
Delta rose 2 percent to $8.15 at 4:15 p.m. in New York trading. The shares have fallen 35 percent this year.
Airlines seek to manage the supply of seats to retain more control over fares. Delta reiterated today that it plans to pare capacity as much as 5 percent this quarter and by 2 percent to 3 percent in 2012. Available seats at AMR may be cut about 10 percent in bankruptcy, according to six analysts surveyed by Bloomberg.
Since the start of December, AMR’s scheduled domestic capacity for the next three months declined 2.5 percent from a year earlier, compared with a 1.4 percent drop forecast by the company two weeks earlier, according to a report today from Hunter Keay, a Wolfe Trahan & Co. analyst in New York.
AMR’s pullback affected 44 domestic routes, or 11 percent of the total, Keay wrote.
Delta also said today it was raising its operating margin forecast for the current quarter to as much as 8 percent from a range of 5 percent to 7 percent as fares increased.
Unit revenue, a measure of fares and passenger traffic, will rise 11 percent to 12 percent this quarter, Delta said.
To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net
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