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Headline News was last updated: January 2, 2010

Service

Guide.

M

Consolidation 

January 2010

Delta/Northwest merger approved by the FAA approval. They now operate under one certificate, merge reservation & flight schedules, use common technical manuals. 

December 2009

Japan & the USA agree to a new "open skies" agreement offering passenger & cargo airlines more routes to service.

Japanese & US governments may have to waive antitrust rules for airline alliances before the agreement can be fully implemented.

Open skies agreement requires that Japanese & US airlines in alliance with each other can share scheduling, pricing, and other information.

Open skies agreement it will allow All Nippon, American, Delta & Japan Airlines to enter joint ventures.

American Airlines, Oneworld Alliance, and TPG (Hedge fund) will invest $1.1B in Japan Airlines if it stays with Oneworld. www.aviationregister.biz

November 2009

China's cargo industry is consolidation to contain heavy losses.

Rates: CAAC is promoting mergers, approving increased freight rates and providing subsidies in to help airfreight operators turn a profit.

China has nine cargo carriers that operated an estimated 70 freighter aircraft.

China’s logistics giant Sinotrans signed a cooperative agreement with China Eastern Airlines (CEA).

Sinotrans may sell a stake in its Grandstar Cargo to CEA or Air China.

Grandstar is a JV cargo airline with Korean Air (25%) set up in 2008.

Air China may form a cargo JV with Cathay Pacific in Shanghai in 2010.

CEA subsidiary China Cargo Airlines may merge with Shanghai Cargo Airlines once CEA completes its takeover of Shanghai Airlines.Yemenia (Yemen's national airline) is to buy 10 A320s worth USD$700M from Airbus.

Air Austral (Argentina) confirmed an order for two A380’s from Airbus.

Air Algerie and Tassili Airlines (Algeria) orders for 11 B737-800s from Boeing.

TSA (Transportation Security Administration) wants regulatory inspection authority for aircraft-repair shops

TSA says terrorists could use the facilities to sabotage aircraft undergoing maintenance.

FAA reports that nearly 5,000 approved repair shops are in business worldwide doing work ranging from repairs to heavy maintenance.

TSA is especially concerned with shops on or near airport property, where terrorists could potentially take control of an aircraft for use as a weapon.

TSA critics report that all shops working on U.S.-based planes already are subject to FAA licensing and inspection.

Consolidation/Merger: The European Union, the USA and six other countries agreed on an "agenda for freedom" for airlines.

Consolidation/Merger: Agenda for Freedom signatories include Chile, Malaysia, Panama, Singapore, Switzerland, and the UAE.

IATA expects other countries, including Australia, India, Morocco, and New Zealand, to sign up in the near future.

Consolidation/Merger: The agenda for freedom could open the way for mergers and

consolidation across the airline industry.

Consolidation/Merger: The agenda for freedom is based on key principles: freedom to access to global capital markets, freedom to do business, and freedom to price services.

Consolidation/Merger update: The agenda for freedom is designed to boost economies and create jobs.

IATA study shows freeing up market access and ownership rules would create over 2M jobs, increase GDP and cut average fares by 38%.

Bilateral aviation agreements that governments now enforce were introduced 65 year ago and bar cross-border mergers.

Bilateral aviation agreements exceptions in the EU: The Air France-KLM merger and the proposed BA and Iberia merger.

Consolidation/Merger update: The non-binding Agenda for Freedom agreement was signed at a meeting hosted by IATA at Montebello, Canada.

IATA says the agreement is an historic achievement that will help set the foundation for a financially sustainable global aviation industry.

Consolidation/Mergers: IATA says the 27 EU countries and the United States account for 60% of global aviation.

Consolidation/Merger update: The agreement could clear the way for more deals like the proposed merger between British Airways and Iberia.

American claims that is opposed to a Delta-Japan Airlines (JAL) tie-up for the same reason that the carrier is confident it’s transatlantic immunity application will be approved: to preserve and enhance competition.

According to American SkyTeam with a Delta-JAL, combination would account for nearly 60% of U.S.-Tokyo passengers, as opposed to oneworld’s approximate 44% share of U.S.-London passengers.

American claims that AA and British Airways only account for about 40% of U.S.-U.K. traffic, whereas Delta-JAL would consolidate the positions of the two largest U.S.-Japan carriers with more than 60% share of U.S.-Japan passengers, leaving oneworld with a 6% share.

American believes significant competition will remain after AA and BA receive immunity, as 78% of travelers on city pairs where AA and BA both provide nonstop service that would continue to have three or more competitive options. Whereas just 27% of passengers on city pairs where Delta and JAL overlap would continue to have three or more competitors for transpacific service.

American’s position is that it is aiming to level the playing field for alliance competition in the transatlantic market and to prevent an unlevel field for alliance competition from evolving in the transpacific.

Responding to comments made by Virgin opposing any AA/BA consolidation on routes to the UK, American says Virgin’s comments are long on accusations, rhetoric, and short on the facts.

BA/Iberia agree to merge: The two airlines carried 62M passengers in 2008 with combined revenues of $22B and a combined value of $7B.

BA/Iberia merger: THe combination will create a carrier with 419 aircraft and 205 destinations.

October 1, 2009

Mokulele (Majority owned by Republic), agreed a JV with Mesa Air Group, the parent of go! to create Hawaii's second-largest carrier.

Mesa Air will own 75% of the new venture, while Mokulele shareholders will get 25%.

Mokulele shareholders will fund up to $1.5M to capitalize the deal. Republic will forgive Mokulele's $3.1M in debt. Aer Lingus' long-haul operations are in serious jeopardy as the Irish airline tries to return to profitability.

Aer Lingus: Says 70% of losses can be attributed to long-haul operations and there is a real risk that it will not be able to continue them.

United, Aer Lingus plan to move ahead with their trans-Atlantic route joint venture.

Avianca (Columbia) (2/3rd) and -based TACA (El Salvador) (1/3rd) will form a holding company to cut costs and bolster market influence in South America.

Avianca/TACA brands will remain separate with combined revenues of $3B.

Avianca/TACA has a combined fleet of 129 aircraft serving 100-Plus destinations in Americas and Europe.

Avianca’s owner is German Efromovich, Brazilian- Colombian-businessman and the Kriete family owns TACA.

EU Commission is investigating the American Airlines, British Airways, Iberia OneWorld alliance.

Republic Airways completed its acquisition of Denver-based Frontier Airlines for $108.75M. (Click on Regulators for a detailed briefing)

Japan Airlines:  JAL creditors are to seek government agreement for a major restructuring of the carrier.

September 2009

JAL may be broken up and the loss making businesses may be placed in a separate operating unit.

British Air & JAL alliance. While Japanese Airlines and its Asian routes appear to be the pearl of the orient for much of the world's airlines alliances, British Airways so far refuses to dive into financial agreements to keep JAL on board with the oneworld alliance. Wall Street & Technology (9/21/2009).

British Airways says it is focusing on deeper cooperation with JAL while fighting off efforts by Delta and its rival SkyTeam alliance. Other global groupings have been courting JAL as well. Wall Street & Technology (9/21/2009).

Fewer banks funding aerospace: 10 banks controlled 50% of all US assets pre. Sept ’08 now down to 6 banks who may be TBTF.

Japan Airlines cuts back on network and staff in hopes of signing up a new international partner by October 2009 (Delta or American favored).

China Eastern Airlines and smaller Shanghai Airlines began talks on merging in June 2008 that would give China Eastern a 50% market share in Shanghai.

The Chinese government ordered China Eastern and Shanghai Airlines to consolidate.

China Eastern and Shanghai Airlines loss-making carriers.

After years of double-digit growth, China's airlines are facing rising costs and declining revenues as the global financial crisis continues.

China's top three carriers, Air China, China Eastern and China Southern Airlines, lost more than $4Bn in 2008.

Shanghai Airlines lost money for two straight years since 2007 faced being delisted from the stock exchange if it fails to turn around in 2009.

IBERIA-BA

Iberia restless as British Airways talks drag on: The U.K. airline risks losing its Spanish peer to Lufthansa or Air France-KLM. This, after March 11: BA, Iberia near agreement: The British airline would take a slim controlling stake in the Spanish carrier.

SOUTHWEST, MIDWEST

June 3: Union unrest at a maturing Southwest Airlines: Southwest Airlines Co. got a taste of what it is like to be an airline on June 3, as its pilots voted down a collective bargaining agreement that would have provided them a raise in the middle of a severe slump in the industry.

May 21: Midwest Air strikes back in battle of Milwaukee: A day after Southwest Airlines Co. announced plans to initiate service in Milwaukee, Midwest Airlines Inc. fired back with an announcement that will bring bigger planes with better range into the fleet of the city's hometown carrier.

May 22: BMI investor sues Lufthansa: Michael Bishop hopes to force the German airline to honor a put option to buy him out. - Jonathan Braude .

May 20: Lufthansa may walk away from BMI: The German airline wants British Midland's majority owner to pump in more capital. -

JVS AND ALLIANCES

May 21: Delta and Air France-KLM in trans-Atlantic JV: As joint ventures go, it's a whopper. And as developments in the global airline industry go, it's pretty consequential too. Air France-KLM and Delta Air Lines Inc. said they had completed their long-anticipated deal to combine operations over the North Atlantic.

May 19: Pilots to lawmakers: Delay United/Continental alliance.

May 15: US Airways: Pilot harmony still a distant destination.

March 17: German carriers consider alliance: Air Berlin and TUIfly may take 20% cross-shareholdings.

May 13: Virgin America buffeted by rivals, economic slump: The startup is struggling to turn a profit during an industrywide downturn. -

March 11: Does Virgin America have turbulent times ahead?

In mid-April: Ceske Aerolinie has two suitors; Japan Airlines seeks government funding; and Southwest posts loss, citing economic slump.

March 30: Air Berlin finalizes TUI deal: Germany's second-largest carrier gains two new shareholders and the scheduled carrier business of TUIfly.

March 24: Red ink dots European, Asian skies: Airline industry losses of $4.7 billion in 2009 may speed up dealmaking.

March 10: Delta-Northwest closed in 2008.  Delta plans job, flight cuts as streamlining effort continues: Delta Air told employees it intends to cut more jobs and reduce 10% of its international capacity as the world's largest airline attempts to navigate a global slowdown while continuing integration work on last year's $2.6 billion purchase of Northwest Airlines Corp.

Jan. 26: Delta agreement saves 10,000 jobs: The Minnesota's Metropolitan Airports Commission resolves a lingering issue from the airline's acquisition of Northwest.

EC to probe airline deal: The commission is worried the Deutsche Lufthansa takeover of Brussels Airlines could hamper competition.

2008

Delta Air Lines & Northwest

Oct. 29: The Department of Justice gave antitrust clearance to Delta's $3.1 billion merger with Northwest Airlines Corp. after a six-month review of competitive concerns, a relatively fast pace for such a complex transaction. The airlines later announced that they had closed the transaction.

September 25: Shareholders approved the Delta-Northwest deal. Integration, then, got underway, including downsizing and possible changes to its post-merger order book.

Lufthansa & Austrian

Feb. 11: EC investigates Lufthansa deal: The Commission is questioning terms of Austrian Airlines' privatization.

In November, Germany's Lufthansa was the sole remaining bidder for a 41.6% stake in Austrian Airlines AG after the Austrian privatization agency said the only rival offer didn't live up to the auction's regulations.

Feb. 10: AirTran increases pressure on one-time target Midwest Air.

Feb. 9: Delta trims domestic airport rent post-merger.

Jan. 30: Continental sets date to switch airline alliances.

Air France-KLM-Alitalia

Jan. 12: Bankrupt Italian airline Alitalia-Linee Aeree Italiane SpA brought on Air France-KLM as a minority shareholder. The investor agreed to pay €323 million ($433 million) for new shares representing 25% of the restructured Alitalia, ending speculation that Deutsche Lufthansa AG could edge out its Franco-Dutch rival in the eleventh hour.

Nov. 18: Europe's largest airline, Air France-KLM, and Italian domestic carrier Air One SpA secured deals to join Italian investors to relaunch bankrupt Italian carrier Alitalia-Linee Aeree Italiane SpA,. The Italian bidders spelled out their offer earlier in the month. Air France plans to take a 20% stake for about €200 million ($252 million) in Alitalia, beating out rival Deutsche Lufthansa to team with the Italian carrier.

Aer Lingus-Ryanair

January 28 2009: Ryanair officials give up: The Irish government's refuses to sell its 25% stake.

January 23 2009: Ryanair retreats from Aer Lingus: The carrier ended its $970 million pursuit after the Irish government ruled against the merger.

January 21 2009: Ryanair may retreat fron Aer Lingus Bid.

January 16 2009: Ryanair weighs higher Aer Lingus bid.

December 2008: In a maneuver to exploit the potential of an airline industry downturn, Ireland's Ryanair Holdings plc renewed its quest for ailing domestic rival Aer Lingus Group plc, which the target firmly rejected. The all-cash offer of €1.40 per share for the 70.12% stake that Ryanair does not yet own comes a year and a half after European Commission competition regulators rejected Ryanair's €1.48 billion ($1.87 billion) hostile bid for Aer Lingus. It also comes two years after shareholders shunned that same offer.

December 5 2008:: Aer Lingus didn't immediately responding to the €200 million ($254 million) sweetener Ryanair added to its €748 million bid for the company Instead, it announced the outcome of a ballot of its own, unionized, workers, which came out in favor of efficiencies and reformed working practices. The former state airline believes the costs cuts will save €25 million a year.

SOLO FLIGHTS, STALLED TALKS AND SPECULATION

Elsewhere, will BA fly solo?: If the markets don't want to play along, British Airways plc captain Willie Walsh would just rather take his airline and go home. - Andrew Bulkeley

Meanwhile, could Southwest Airlines Co. be targeting Atlanta or AirTran Holdings Inc.? The Deal's Lou Whiteman raised the question Dec. 18. Meanwhile, British Airways and Qantas Airways Ltd. have called off merger talks. Earlier in December, BA said it was weighing a deal with Qantas "via a dual-listed company structure."

UAL Corp. and US Airways Group Inc. have secured fresh financing to boost liquidity and Southwest Airlines reported its first quarterly loss in 17 years. But could things start to look up for the airlines? Maybe so.

Sept. 17: J.P. Morgan Chase & Co. analyst Jamie Baker in a research note throws out the possibility that the airline business could post record profits in 2009 should fuel costs continue their downward trend and airlines keep capacity cuts in place.

Better times could also delay any further industry consolidation, as airlines tend only to merge when times are bleak. The current downturn, for example, helped spur Delta Air Lines Inc.'s pending takeover of Northwest Airlines Corp., and generated significant discussions among other carriers.

OVER THERE

In late August, German carriers TUI Travel plc was in talks with Deutsche Lufthansa AG and Thomas Cook Group plc were weighing a deal to take on startup upstart Air Berlin plc & Co. Luftverkehrs KG with a rival discount carrier.

Earlier in the month, the latest airline M&A talk again surrounded British Airways plc and Spain's Iberia Lineas Aereas de Espana SA.Talk of other prospective tie-ups followed. (Meanwhile, the two had cooked up joint venture plans with American Airlines Inc.)

In late November, a TPG Capital-led consortium withdrew its bid for Spain's largest carrier after bid partner British Airways said it wouldn't increase its stake in the airline.

M&A activity among U.S. carriers cooled, as carriers kept taking themselves out of the running, while the industry braced for new cuts and more alliances.

UAL, the parent of United Airlines Inc. walked away from talks with US Airways May 29, saying instead it might prefer an alliance with Continental Airlines Inc. The two struck a deal June 19.

The Wall Street Journal reported April 28 that news came a month after Continental pulled itself out of the consolidation game, saying in a statement April 27 its board supported management's recommendation that "in the current industry environment" it was not the right time to merge with another airline. Continental at the time pointed to alternatives related to alliances. The same day, UAL issued a two-sentence statement from its chairman, president and CEO Glenn Tilton regarding consolidation, saying it would "pursue all options to ensure a strong, sustainable future." UAL and Continental had reportedly been in formal merger talks and though Continental had taken itself out of the running, UAL was still in talks with US Airways on a potential merger,

Meanwhile, Delta on April 14 agreed to acquire Northwest for more than $3 billion, at long last. (The next day, UAL issued a statement from Tilton saying: "We will participate in consolidation when and if it is the right choice.")

Delta and Northwest had been circling each for months and trying to win labor approval for a deal. Reports indicated April 11 that pilots had reached a tentative deal that would allow for a merger, after months of impasse. The pair resumed talks April 7, weeks after pilots rejected arbitration March 19, stuck at an impasse. A Delta-Northwest deal looked close or a reality Feb. 19, when pilots jumped on board for a tie-up ahead of a scheduled meeting Feb. 20, but the picture was cloudier just a week later. Regardless, the year got off to a busy start for airline merger buzz. A rundown:

•Delta lobbied its board for approval Jan. 11 to enter formal merger talks with both Northwest and UAL. The request followed months of rumors about potential deals, and comes as surging oil prices have driven most airline shares to 52-week lows,"

Many observers aren't convinced consolidation can solve the industry's trying structural problems.

•The news came weeks after Delta reportedly suspended plans to sell its Comair regional business as buyers were few and talk of a larger deal for Delta heated up.

•In mid-January, Delta's two prospective merger partners looked likely to bring both opportunities and challenges to any deal, including United's domestic network, which is broader than Northwest's. But a deal combining the country's No. 2 and No. 3 carriers would surely draw labor and antitrust scrutiny.

•A deal with Northwest could be further complicated by a hostile counteroffer, with Continental Airlines Inc. and AMR Corp.'s American Airlines Inc. both viewed as potentially interested in acquiring Northwest. In the worst case scenario, Delta could be left at the altar without a partner should Northwest agree to a counteroffer and United, after initially being spurned by Delta, struck its own deal with another airline. A hostile counteroffer for United is considered less likely given that airline's larger size and complexity.

(AMR cut another deal April 16, agreeing to sell its money management arm, American Beacon Advisors Inc., to Pharos Capital Group LLC and TPG Capital for $480 million.)

•In mid-February, Delta and Northwest agreed to their deal framework. But, ahead of unveiling any merger agreement publicly, the companies:

Went to labor groups prior to announcing the transaction in hopes of easing what has historically been one of the most difficult aspects of integrating airline deals.

Some details must still be ironed out, however, such as the size of an equity investment the pair are to receive from international alliance partner Air France-KLM Group.

There is also some discussion of offering Northwest shareholders a small premium over what was originally intended as an at-market stock swap deal in hopes of discouraging rival bids for the airline.

The companies had hoped an investment of between $750 million and $1 billion by Air France would scare away rival bidders for Northwest, which is a coveted merger partner for its access to restricted Asian markets.

A notable element of a Northwest merger is the freeing up of the "golden share" agreement it has with Continental that affords it the right to block any potential deal Continental may go after. Having announced plans to deal with Delta, Northwest forfeits the golden share. And according to a Reuters report April 14, Continental and United were ready if others announced deals.

UAL Corp. has rekindled on-again, off-again talks with Continental in recent weeks as the odds of a deal with Delta become more remote.

Houston-based Continental, which despite being smaller than United, Delta and industry leader American Airlines Inc., is considered healthier than most, thanks to its strong South American route network and booming trans-Atlantic hub at Newark Liberty International Airport.

From an alliance prospective, Northwest is already a SkyTeam alliance partner, while United is a member of the rival Star Alliance. Should Continental decide against a deal with UAL, it was thought the carrier could consider a SkyTeam agreement, something it acknowledged in its April 28 statement. "An alliance shift, coupled with a strong codeshare agreement to coordinate schedules with UAL and sell tickets on each other's planes, would give Continental many of the benefits of the merger without exposing it to the risks of a deal."

Among other carriers, UAL's shaky labor situation could make it a less-desirable merger partner, while American Airlines could go hostile to break up a Delta-Northwest deal, but it could also seek out opportunities related to such a deal, he suggested, like "an antitrust challenge where American demands additional access to coveted Pacific Rim destinations including China to be more likely."

On the regulatory front, it looked at the end of January like a deal between Delta and either United or Northwest would likely get the OK from antitrust authorities.

Consolidation chatter filled the air on Jan. 23 as Southwest Airlines Co. signaled it could jump on the dealmaking bandwagon, given the right opportunity. Rather than a deal for a competitor like AirTran Airways Inc. "Southwest is more likely to seek out gates and other assets divested as part of consolidation elsewhere in the industry."

M&A analysis

Airline merger advocates could soon have it their way. "Sustainable profitability remains an elusive goal for the airline industry, leaving management teams finally ready to consider all options:

•the high price of oil exacerbating structural problems

•greater shareholder pressure

•management teams having no other options

•federal regulators appearing more supportive

•uncertainty about the 2008 election  sparked dealmaking under the then current administration

Delta seemed likely to be the first to get things started.

With both international opportunities and cost-reduction imperatives in mind, most expect Delta to eventually make a run either at Northwest or United, with Northwest, given its smaller size and existing partnership with Delta in the international SkyTeam alliance, perhaps the more palatable choice.

Lufthansa said Dec. 13 it would pay $305 million for a 19% stake in U.S. discount carrier Jet Blue Inc. The news came a week after aftLufthansa retreated from bidding for Itfteralian carrier Alitalia. A possible bid contest for the Italian carrier kicked off December airline M&A activity in Europe. Ahead of Lufthansa's retreat, Air France-KLM unveiled plans Dec. 6 to go head to head for the company with Italian low cost carrier Air One and other Italian investors. The board met to agree on a bidder Dec. 12, but then extended the bidding until Dec. 18, citing a new offer. The company said the next day that SA Holdings Ltd., Evergreen LLC and THL Transportation were interested. Rival bidders revealed their turnaround plans for the carrier Dec. 17.

Jan. 11 Air France-KLM's plans for Alitalia looked likely win cutting Milan out of the equation. Air France-KLM walked away from its €139 million ($217 million) bid for Alitalia following the collapse of negotiations with unions on disagreements over how much restructuring work the carrier needed. The Italian government then unveiled plans April 3, to try to revive talks between the would-be buyer and unions representing Alitalia's workers in a move to stave off a bankruptcy filing for the carrier.

Elsewhere, in early January, Singapore Airlines Ltd.'s hopes of expanding into China were dashed after "shareholders in China Eastern Airlines Corp. rejected its agreed bid for a 24% stake. Their decision clears the way for Air China's parent, China National Aviation Holding Co., to make a higher offer, though the rival suitor has yet to win over its target.

The Alitalia auction, was the latest attempt by the Italian government to sell off its 49.9% stake in the money-losing carrier. The government called off the auction July 18 after the last bidders standing at the time pulled out due to onerous restrictions. The government then said July 26 it would ease conditions to revive interest. U.S. private equity firm TPG, which has been trying to buy an overseas-based carrier for some time, was also in the running earlier in the year.

TPG consortium in late November withdrew its bid for Iberia, after bid partner British Airways said it wouldn't increase its stake in the airline, clearing the way for Spanish bank Caja Madrid to buy up shares held by two other Spanish lenders. TPG then said Nov. 28 it would be open to bidding for Iberia again. BA has since been in talks with Caja Madrid over the airlinels future and in March raised its Iberia stake to 13.15% from 10.1%, the Journal said July 29.

North America

Airline M&A buzz abounded in November. AMR made headlines Nov. 27 when it said it would shed its regional carrier American Eagle to boost cash and trim costs. The news came two months after the company drew shareholder fire from FL Group hf, which made public Sept. 27 a letter urging the company to boost its stock price through the spinoff of American's frequent-flyer rewards program, AAdvantage.

AMR's stock fell from more than $40 per share in January to below $25 per share, where it hovered in November -- a precipitous drop that has cost investors $5 billion, Reykjavik-based FL Group said at the time. Further, the 9.1% AMR shareholder said, a spinoff could boost shareholder value by more than $4 billion. Unsatisfied, FL Group on Nov. 20 cut its stake in the airline's parent to 1.1%, saying the American Eagle move was a step in the right direction, but lacked clarity with respect to timing and valuation.

Reports of talks between Delta and UAL created a flurry Nov. 14. The news came three months after Delta installed former Northwest CEO Richard Anderson as chief executive and nearly seven months after the Atlanta-based carrier, having successfully staved off hostile bidder US Airways Group Inc., emerged from bankruptcy as a standalone company.

Delta's pilots came out a week later saying they have no interest in seeing a Delta-UAL tie-up, while those familiar with Delta's thinking would prefer a deal with Northwest, likely posing less union opposition and regulatory hurdles. The company unveiled plans Aug. 21 to install Anderson as its chief executive, which again stirred up merger rumors that circled the carriers after filing for bankruptcy protection more than two years ago, and again, earlier this year when Delta was the target of a hostile bid from US Airways.

Anderson denied negotiations with United in a statement Nov. 14 but had in October spoken openly about the possibility of dealmaking if the circumstances were right. It looked like the consolidation process was in motion:

Delta talked up the idea of industry consolidation, highlighting its intention to participate in the process. [Mmany of the nation's legacy airlines were informally kicking around merger scenarios.

Weeks earlier, Delta unveiled a joint venture with Air France-KLM, solidifying its ties to SkyTeam, which looked like it could make a deal with UAL, a Star Alliance member along with Deutsche Lufthansa AG, less likely. 

In many cases, shareholder pressure has abounded. Kicking off the Delta-UAL buzz, Pardus Capital Management LP, a shareholder in both Delta and UAL, urged Delta in a letter to consider M&A and pointed to UAL. Delta said it was reviewing strategic options. The hedge fund planned Nov. 16 to take its argument to other investors.

Midwest Air Group Inc. accepted a $450 million offer, or $17 per share, from Texas private equity firm TPG on Aug. 17, rejecting long-time hostile bidder AirTran, once again. Midwest spent months keeping AirTran at bay. The carrier finally put itself up for sale July 31, with its board forming a committee to explore strategic alternatives, likely hoping a white knight would swoop in to the rescue.

Investors waited Aug. 10 as AirTran's tender offer deadline was set to expire. AirTran's, $389 million, or $15.75 per share offer, lost out to TPG's $16 per share bid on Aug. 13, a deal Midwest's largest shareholder, Pequot Capital Management Inc., expressed concern over. The next day, AirTran sweetened its offer to $16.25 per share, and TPG replied Aug. 17 with a winning $17 per share proposal.

The showdown happened quickly compared with AirTran's long pursuit of its rival.

MERGER RESISTANCE

•Midwest rejected AirTran's original $290 million offer in December 2006.

•AirTran then raised its offer to $345 million in January, about one month after the target said it wasn't interested in a deal.

•AirTran said April 2 it had sweetened its hostile bid for Midwest to $389 million -- 34% above the initial bid.

•Eleven days later, Midwest shot it down, again.

◦AirTran's goal was to create a national discount carrier through its purchase of Midwest, stronger than either on its own, but Midwest contended it could stand firmer on its own and saw some shareholders holding out for a better price.

◦AirTran accused the target's board of "all but ignoring investors."

•After winning support from two proxy services and one union's pension arm, AirTran said June 11 it would extend its $389 million tender offer for Midwest until Aug. 10.

•Shareholders elected AirTran's slate of three nominees to its board during Midwest's shareholder meeting June 14 and asked the would-be buyer to plead its case, which it did July 17. AirTran was able to secure approval of Midwest stakeholders collectively holding 59% of shares, but the takeover hit a standstill when Midwest's board refused to waive its poison pill provision. Midwest then said July 31 it would open talks with AirTran and other prospective suitors.

Airline investor, TPG hit a few rough patches abroad.

Macquarie Bank Ltd. and TPG's $9.2 billion buyout of Qantas -- which would have been the largest buyout ever in Australia and the world's biggest aviation transaction -- hit turbulence earlier this year, raising the possibility it could be grounded. Shareholder opposition, sparked by improving market conditions, pressured Macquarie and TPG to rethink their takeover. The pair reworked their bank financing and lowered the approval threshold to 70% from 90%. It was to no avail. After failing to gain sufficient shareholder approval and after days of confusion, the consortium, Airline Partners Australia, finally conceded May 8 that its bid had failed.

TPG was also in the running for Italy's Alitalia earlier in the year, but it retreated. TPG said Oct. 4 it wouldn't likely bid.

Meanwhile, the TPG-led consortium that had been vying for Iberia, which includes British Airways plc and Spain's Vista Capital SA, Inversiones Ibersuizas SA and Quercus Equity, made an indicative $4.6 billion proposal, but then threatened to yank it if the airline did not respond by the end of July. A report then indicated Aug. 26 the TPG group could cut an offer price. Air France-KLM, Europe's No. 1 airline, and Apax Partners Worldwide LLP have also considered an offer for Iberia. The carrier said Nov. 15 it was fielding an offer worth $5.5 billion from a consortium led by Spanish private equity group Gala Capital Partners Equity SCR SA, bettering a $5 billion bid from U.S. private equity firm TPG and British Airways plc. TPG said in response it planned to proceed with its offer, and then withdrew it Nov. 26. The carrier's future remains unclear as consolidation, kicked off by Air France SA's 2003 deal for KLM Royal Dutch Airlines NV and Lufthansa's 2005 deal for Swiss International Air Lines AG, will likely continue, the Financial Times noted.

TPG has scoured the globe for carriers under the assumption that increased global competition will drive consolidation, as the industry in Europe is on the verge of deregulation, and plans to use Iberia as a core from which to build.

In March, European Union transportation ministers unanimously backed an "open skies" pact to bring more competition to trans-Atlantic air traffic and spur airline consolidation. Though the pact wouldn't be implemented until the end of March 2008, a consolidation wave could soon kick off. On March 27, German carrier Air Berlin plc & Co. Luftverkehrs KG said it would pay $186.2 million in cash and absorb up to €200 million ($267.2 million) in debt to buy former SwissAir unit Lufttransport-Unternehmen GmbH, known as LTU, a deal that makes it Europe's No. 4 airline.

BANKRUPTCY EXIT

Delta soared out of bankruptcy April 30, 2007, ahead of schedule, and Northwest headed for the exit May 31. Delta flew solo after months of standing firm against a would-be acquirer in US Airways Group Inc.

•US Airways first presented its merger case to Delta in November 2006.

•Delta shot down the offer and said it planned to emerge as a standalone entity. Should the target have changed its mind, the deal would have been reminiscent of Tempe, Ariz.-based US Airways $1.5 billion merger last year with America West Group Holdings Corp., which formally ended its own stay in Chapter 11.

•Delta rebuffed US Air's $8.4 billion advance Dec. 19, calling it "inferior in value, structurally flawed and [saying it] cannot be executed as claimed."

•Also in December, Delta said its standalone reorganization plan, valued by Blackstone Group LP, implied a "consolidated equity value" for the company between $9.4 billion and $12.0 billion.

•In January, US Airways raised its offer for Delta to $10.2 billion.

•US Air withdrew its takeover proposal Jan. 31, but a general air of hostility among would-be merger partners remained.

TARGET AIRLINES

AMR was in February 2007 reported to be a target, which may have to beat back British Airways plc and Goldman, Sachs & Co. if it wants to keep flying solo. Citing sources familiar with the matter, BusinessWeek reported in February that the duo was among a group vying for control of the U.S.'s top airline and that the proposed bid was between $46 and $52 a share, or $9.8 billion to $11.1 billion. But any proposal could run into antitrust issues.

Then there was the factor of UAL, which said Aug. 24, 2007, it could sell off its maintenance business to shore up some cash, a deal which analysts estimated could yield $300 million to $600 million. In December 2006, speculation swirled around UAL and Continental. Rumors regarding UAL first took flight in September 2006 after a published report revealed it had hired Goldman Sachs to explore strategic alternatives.

During its nearly three years in bankruptcy, UAL cut 25% of its workers, trimmed more than $10 billion in debt and cut annual costs by more than $7 billion before resurfacing post-Chapter 11 in February 2006.

For uptodate detailed analysis on airline consolidation refer to Dealwatch.com

Bankruptcy:  Kirkland & Ellis bankruptcy attorney James Sprayregen says there don't appear to be any restructurings of major airlines that appear imminent. (September 2009).