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US Airways Submits $8 Billion Bid for Delta November 15, 2006

Posted by Andrew in Delta, US Airways.
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Citing an aspiration to become the premier trans-Atlantic carrier, Phoenix-based US Airways submitted an $8 billion bid today for Delta Airlines. US Airways, led by CEO Doug Parker, is still in the midst of completing the merger that united US Airways and America West. Industry analysts have “been expecting a wave of consolidation and said successful completion of a US Air-Delta deal could jump-start the process.” US Airways offered to purchase Delta after merger talks fell through. Doug Parker cited the need for speed, claiming that “if we wait for Delta to emerge from bankruptcy, it will be too late to maximize all the synergies.” The combined company would employ 82,000 employees, and according to US Airways estimates, a merger would yield $1.65 billion in annual savings. If the bid goes through, Delta’s name reportedly will be retained, as it has greater brand recognition. Despite the news, Delta CEO maintained that his company would seek to emerge from bankruptcy in early 2007 as a stand-alone carrier. At least one analysts believes that the bid is a hostile takeover, as the Delta CEO has voiced his displeasure with the deal. Ultimately, the deal hinges on the shareholders, who have been offered “$4 billion in cash and 78.5 million shares of US Airways stock, with an aggregate value of around $8 billion based on Tuesday’s closing stock price.” When questioned about the possibility of legacy carrier United Airlines making a competing bid for Delta, UAL CEO Glenn Tilton said that his company had approached Delta about a merger, but was rebuffed. Even so, Calyon Securities Ray Neidl believes that “the big concern is government regulators, if they give the green light. And if they do, it will probably set off a series of potential M&A activity in the industry.” This merger poses some major operational challanges that leave some industry analysts perplexed. Delta operates an all Boeing fleet, while US Airways is moving towards an entirely Airbus fleet. Furthermore, the proposed airline would have west coast hubs in Phoenix, Salt Lake City, Las Vegas, and Los Angeles. How will the carrier reconcile these differences? Even so, some believe that a United merger would be more logical, as the two carriers share comparable fleets and route structures that complement each other. US Airway’s bid is likely the catalyst of a round of consolidation in the North American market, as legacy carriers seek to become more efficient and battle their low-cost carrier competition.

Source: Reuters

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UPS: No Time Pressure for Airbus A380 Decision November 8, 2006

Posted by Andrew in Airbus, Fedex, UPS.
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United Parcel Service (UPS) issued a statement this morning declaring that it was in no rush to make a decision on its A380 order with Airbus. There is speculation that UPS may follow Fedex’s suit, as the Airbus A380 is seen by some analysts as an oddball aircraft in the freight company’s fleet. If UPS cancels, Airbus would likely be forced to cancel the freighter variant of the A380, which currently only has two customers. Citing “enough other planes scheduled for delivery over the next two years to cover its immediate needs,” UPS for the time dispelled any speculation of a cancellation. The freight carrier neither confirmed or negated the possibility of a cancellation in the future, but delayed a decision until a detailed analysis is made by the company. UPS has on order ten Airbus A380 aircraft, with options for an additional ten to be delivered in the next decade.

Source: Reuters

Fedex Cancels Airbus A380 Order, Defects to Boeing November 7, 2006

Posted by Andrew in Airbus, Boeing, Fedex.
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Fedex, frustrated with delays in the Airbus A380 program, cancelled its order for ten of the aircraft in the freighter configuration early this morning. Citing “significant delays for delivery of A380s” and a need to meet the growing global package demand, the freight carrier elected to purchase the Boeing 777F instead of the much larger Airbus A380 aircraft. In response to the largest blow dealt to the Airbus A380 program, an Airbus spokesman said that “Airbus regrets FedEx’s decision but understand[s] their need to urgently address capacity issues.” Although Dubai-based Emirates has been threatening cancellation in recent months, Fedex is the first major carrier to follow through. Fedex’s cancellation came as a surprise to the aviation industry this morning; United Parcel Service, the main competitor of Fedex was rumored to be considering a cancellation, but such an action was not expected from Memphis based Fedex. The Boeing 777F, scheduled to be first delivered in 2008, is not seen as a replacement for the A380. The Boeing 777F is of comparable size to the MD-11, the backbone of Fedex’s widebody fleet. With MD-11’s becoming more difficult to acquire, many see Fedex’s purchase of triple-sevens as a move to augment an aircraft size that serves the company well. Fedex indicated that the decision to purchase the Boeing 777 freighter variant came as a result of the recently announced delays. The freight company, an early proponent of the Airbus A380 program, noted however that it will continue “to be Airbus’ largest wide-body airplane customer and will add additional new and used Airbus wide-body aircraft to its fleet in the coming years.” Boeing did not comment on the recent deal, however investors rewarded the company by boosting its shares on news of the deal.

Source: Reuters