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TheStreet Open House

Airline M&A Spells Access to Asia

CHARLOTTE, N.C. -- While airlines have many reasons to merge, a key one these days is to enhance the value of coveted routes to Asia.

Among U.S. carriers, Northwest (NWA) and United (UAUA) have long been the leaders in Asia.

Now Northwest and Delta (DAL) are planning a merger, while United and US Airways (LCC) have discussed one, although the urgency has diminished, sources say.

Experts say the Delta-Northwest deal has the more obvious benefit, combining Delta's superior hubs and traffic with Northwest's Asia system, but a United-US Airways deal would push some US Airways passengers to United's Asian network.

As Northwest CEO Doug Steenland said at a press conference announcing the deal with Delta, "Northwest is the preeminent airline from the U.S. to Asia, but our domestic operation is not optimally sized to support this great Asian access." The merger would bring restoration of Tokyo-New York service, which Northwest suspended in 2005, he said.

Meanwhile, a United-US Airways merger, were it to occur, "would bring along a customer database that United doesn't have," says aviation consultant Robert Mann. "But you don't get a spectacular global network, like you do with Delta-Northwest."

Looking ahead, however, a United-US Airways deal could build on the strengths of the Star Alliance, and could offer an enhanced relationship with alliance member Lufthansa and perhaps with JetBlue (JBLU), as Star Alliance seeks a stronger presence in the New York market. Lufthansa owns 19% of JetBlue.

A Tight Sky Market

Northwest and United both hold rights awarded under a 1952 aviation treaty with Japan, which provided two U.S. carriers with the ability not only to fly from the U.S. to Japan, but also to fly beyond Japan into Asia.

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