Originally Posted by
iahphx
The guy in charge of setting fares for USAirways is Parker's long-time "right hand man" Scott Kirby. Kirby is a genius at pricing. I'm sure he's the guy who's overseen all the modeling on the Delta merger.
From an airline financing standpoint, especially after US upped its offer twice, I really wonder, if Kirby is a genius at pricing. Do not get me wrong, I followed your arguments continously and you had some good points in various discussions, which were ridiculed by posters with hardly any clue of the industry, which did not help the discussion any further.
But back on topic. You may want to compare two successful airline mergers, better, acquisitions. I am talking about AF/KL ( and the cost of buying all those assets ) and LH/LX, an acquisition worth about
3% of the latest offer for DL. If you look at the assets of DL and compare them with KLM or Swiss, you really wonder why anybody is willing $ 8+ billion , let alone 10 or 11 billion... On a cynical sidenote, the net value of KLM`s and Swiss`slots at Heathrow is higher than the complete DL hub at SLC + the MD 80`s they own...
Originally Posted by
iahphx
It's no secret that Delta sells lots of domestic junk fares. For years, they've been flying too much domestic capacity. Too many seats, too many junk fares. Of late, Delta has tried to curb this capacity (send widebodies overseas), but it's not enough, especially as low cost competition has heated up along the East Coast.
Not necassarily too much capacity, but definitely costs which do not allow them to offer those kind of fares. It already killed, maybe not killed, but wounded Eastern severely 20 years ago and Delta seemed to completely ignore that their previous home market Florida is gone and can only be recaptured with a completely different strategy, but not one named Song...
Originally Posted by
iahphx
By merging and cutting capacity about 10%, the idea is to get the average fare up. Bye-bye to "excess" inventory and junk fares. This is obviously bad for mileage runners and others who like to buy rock-bottom tickets (including me!), but good for airline profitability.
A combined US/DL would not really cut capacity that would allow them the say bye-bye to excess inventory and junk fares. One shuttle operation would be gone, that is for sure. One could expect the authorities to take away some slots at congested airports, that will be redistributed to other ( low cost ) carriers resulting in the obvious dilemma ( at least for a legacy carrier )
I was difficult to justify the acquisition at $ 8 million, but the current amount is insane. DL, as a stand alone carrier, will face huge problems and will be subject to a merger or acquisition in the future, but no airline, not even the best of the industry ( balance sheet point of view ) could swallow an airline easily at this price. And we are not talking about a prime airline with a proven business model a la BA,SQ or Cathay, we are talking about Delta....
