Aero-politics: February 2008 Archives

The wall of silence around the US airline industry’s biggest (possible) deal in years may have cracked, just a little but. The top two Delta Air Lines executives broke silence on a possible merger with Northwest Airlines, telling employees that the Atlanta-based carrier has yet to “arrive at a potential transaction that meets all of our principles” for a merger or combination. The employee memo is the first communication from either Delta or Northwest Airlines since the two carriers (sort of) acknowledged merger discussions. Delta chief executive Richard Anderson (right) and president and chief financial officer Ed Bastian said in their internal memo that they would not enter into a deal unless the combined carrier was be called Delta and be headquartered in Atlanta. Although these principles are similar to those stated earlier by the airline, executives at the airline have been silent for a week, as have officials of the Air Line Pilots Association chapters at both carriers. (Listen to a Tuesday afternoon IAG podcast here about the labor issues.)

Everyone has a soapbox someday. In London’s Hyde Park, they even set aside a corner (Speakers’ Corner, appropriately) for advocates of almost any cause, from the antivivisectionists to the antidisestablishmentarians. Here in Washington, people with causes are allowed to speak for however long they wish if they’re Members of Congress, and others sometimes are also given a soapbox from which to pour out their beliefs. Left Field was fortunate the other day to be given a soapbox by the International Aviation Club of Washington. The venue was a so-called media forum where journalists were expected to hold forth on the issues of the day, but as usual, the experts on the podium ended up learning from the real experts in the audience. The topic de jour was mergers and consolidation, and even the experts didn’t know what the next day's headlines would be. But as the group went through the various rumoured combinations (should Southwest buy United, etc), a thought suggested itself, and we’re going to repeat it here: is this an opportune time for something more ambitious than a domestic merger that may or may not take capacity out of the system, that may or may not produce strong revenue bump-ups, and that may or may not please customers?

These United States mark Presidents’ Day today, commemorating the birthdays of two of the greatest, George ‘Father of his Country’ Washington and Abraham ‘Preserver of the Union’ Lincoln. It’s a big day this year as these same United States prepare to electtheir next president. One of the people who wants very much to become the forty-fourth president said the other day that when she’s the chief executive, she’ll be very wary of the airline mergers and consolidation possibilities that are getting almost as much public attention as her race against Barack Obama, the Illinois senator who is leading Mrs. Clinton (right) just now. Both are eagerly courting the blue-collar and union vote, and both are seeking to reassure working Americans that they would protect their jobs against the ravages of corporate bosses and other capitalist predations. Indeed, Obama has expressed scepticism about mergers of any kind. It’s interesting that airline issues even make it onto the candidates’ radar screens, but there’s a sharp up-tick in interest in the issue in the capital city and Washington is becoming quite exercised about possible consumer dissatisfaction and other possible fallout from airline mergers. Someone you know can be heard here talking about this phenomenon on an IAG podcast.

Hail, farewell and hello? Robert Milton, the American/Canadian who took Air Canada through reorganization, has moved toward making a graceful exit from the airline industry. But Milton, who heads up the airline’s parent company, ACE Holdings, may have one more big deal to do. Milton said that the holding company, created when Air Canada emerged from reorganisation, had been “approached.” Milton said “we have now been approached by private equity, by pension funds.” Although he was not explicit in defining the direction - buying or selling – the prospect of a cross-border investment is important, all the more so as the era of international liberalisation approaches. (That's the US-Canada border, to the right.) Both the United States and Canada limit investment in airlines by foreign companies and citizens, as the Canadian transport minister was quick to note after Milton spoke, but still any step across borders is significant. Even as he acknowleged that Canadian law limits foreign investment, Milton told analysts “there has been dialogue with the US space looking to change, and I don’t think it’s inconceivable that Air Canada could be part of it and I think it would make a lot of sense for a US airline to look to Air Canada.”