Delta Airlines still considering an acquisitionCFO Ed Bastian says the airline will have to re-evaluate its business model if oil prices remain near $100 a barrel.November 7 2007: 6:44 PM ESTATLANTA (AP) -- Delta Air Lines Inc.'s evaluation of whether it would make sense to purchase another carrier is a "front-burner" issue for the nation's third-largest airline, a senior executive said Wednesday."I think there's value there," President and Chief Financial Officer Ed Bastian said of consolidation during a New York investor conference that was broadcast on the Internet. "We just need to find the right transaction for the constituency. If we do find it, we'll certainly consider it."On the flip-side, Delta (Charts, Fortune 500) recognizes that buying another airline could have considerable financial costs and cause friction among employees, Bastian said.Bastian was noncommittal on how long it would take the Atlanta-based airline to complete the review process, nor what Delta's ultimate decision will be. But, he did say that deciding whether to acquire another carrier is on Delta executives' minds."It's a front-burner issue for us," Bastian said.Bastian said Delta believes the consolidation question should be answered before the airline considers whether to sell or spin off any of its ancillary businesses, such as its growing maintenance, repair and overhaul unit."We'll be smart, we'll be knowledgeable about what the opportunities are, but I think we want to answer the consolidation issue first," Bastian said.The airline has said previously it is considering shedding regional feeder carrier Comair, but it has been mum on any talks it may be having.Delta's CEO hints at airline deal On other issues, Bastian said Delta has been pleased with its recent results despite the persistently high cost of fuel. He said that next year, Delta expects growth in its domestic business to be strained, while growth internationally is expected to be strong.Bastian said Delta would have to re-evaluate its business model for next year, particularly on the domestic side, if oil prices near $100 a barrel persist.Bastian also said that Delta continues to negotiate creditor claims following the airline's emergence from bankruptcy earlier this year. The airline has roughly 400 million shares outstanding, of which about 110 million continue to be held back pending final resolution of claims, Bastian said.Earlier Wednesday, Delta said it has formed a partnership projected to generate $1 billion in revenue over 10 years for its maintenance, repair and overhaul unit and the parts manufacturer Chromalloy Gas Turbine Corp.Delta said the deal with Chromalloy will be a boon for Delta's TechOps division.Chromalloy will manufacture lower cost alternative parts that Delta can use to repair and overhaul engines, Delta spokeswoman Betsy Talton said. Currently, when Delta repairs an engine it typically gets parts for the repair from the original equipment manufacturer, though it has used non-original manufacturer parts in the past, Talton said.The partnership is expected to generate $1 billion in revenue that the two companies will share, Talton said.

 

Sorry for the dumb question here... but how does buying another carrier help with the fuel costs?

 

Reduces capacity, and raises prices. Well in theory until SWA comes along and peppers the route.

 

Exactly. In any merger scenario with the majors, I think you will see capacity reduction. The problem is this will only raise the yields in the short term. Any capacity taken out by the majors will eventually be put right back in by the LCCs.

 

i heard from a friend that works at dal that it might possibly be frontier they aquire.

 

Why not buy Air Tran ?

The thread does say..."Delta looking to buy..."

I hope you AirTran folks enjoy San Juan. My fav place to go was the Embassy Suites (outback Restaurant) or the El San Juan Hotel which has gambling and Club Babylon, or to the Metropol for Cuban food. That's if you stay by the airport. If you layover in Old San Juan, stay close to the hotel..everything you need is right there; however it's a short walk to the Black Angus. (I think thats the name of the local talent bar)

FF

 

I'm not a smart man, so I must be missing something. Delta has over $2B in cash, but still over $8B in debt. How can they go buy somebody else? - more debt I guess??..

 

What in the WORLD are you talking about??? Go back to Sticky Fingers, see you in the Kong!

 

It's the American way. I had a negative net worth when I bought my first house with $500 down--one of the best investments I ever made.

 

Go out the Embassy Suites front door, straight ahead to the beach, take a left to the Hungry Sailor bar. Cheap beer and great hamburgers. Cheaper than the Outback.