Saturday, June 24, 2000

Delta shows urge to merge

By Cliff Peale
The Cincinnati Enquirer

        Delta Air Lines is flirting with Continental Airlines for two reasons, analysts said Friday: It's an attempt to slow down a merger between two rivals, and a recognition that the company will have to get bigger.

        But most observers said any Delta merger is not likely to threaten the airline's huge hub at Cincinnati/Northern Kentucky International Airport.

        What effect airline mergers might have on fares remains murkier, with opinion divided on whether they will aid or hinder competition.

        “We are not going to sit idly by” while other airlines merge, Delta chief executive officer Leo Mullin told USA Today this week.

        UAL Corp., parent of United Airlines, already has agreed to buy US Airways Group for $11.6 billion. Earlier this month, news leaked that Atlanta-based Delta was discussing a possible deal with American Airlines.

        And American's parent company, AMR Corp., reportedly has approached Northwest Airlines Corp. about a purchase.

        Thursday, Mr. Mullin told USA Today that Delta was “in the study phase” of looking at a merger with Continental.

        Analysts said many of the merger talks are defensive. But if the United-US Airways deal goes through, more mergers could follow closely.

        “A lot of this may be posturing just to throw a wrench in United's plans,” said Rob Milmore, an airline analyst at Arnhold and S. Bleichroeder in New York. “I'm sure all the airlines are talking.”

        The impact of the big-money talks on Greater Cincinnati could be huge. Delta operates its second-biggest hub here, with 509 flights a day, and observers said the airline probably would want to keep expanding that operation.

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