The Skies Are Abuzz, Again
There's never a dull moment in the airline business. Despite the airlines' best efforts to nudge prices up, sluggish demand for the fall season has triggered another fare war. Trying to avoid even steeper cuts, Delta Air Lines was set to announce on July 30 that it will slash advance-purchase fares by 30% until Dec. 14.
And dealmania is again sweeping the industry. With the ink hardly dry on British Airways' proposal to invest $750 million for a 44% stake in USAir, rumors are flying that BA and USAir will soon offer up to $500 million for Trans World Airlines, which is operating under Chapter 11 protection. That could spark a bidding war in bankruptcy court. And industry insiders are buzzing about the possibility that Air Canada, with financial backing from the Fort Worth-based Bass Brothers, will try to acquire Continental Airlines. Houston entrepreneur Charles Hurwitz has already offered $350 million for the ailing carrier, but only $25 million of the purchase price is equity.
Air Canada also entered merger talks with the country's other major carrier, Canadian Airlines International, after American Airlines dropped plans to buy a stake in that airline. But many believe an all-Canada combination would do little to strengthen the carriers for increasingly crucial international competition, and Canadian's stock fell sharply on concern over its finances.