OneWorld member American Airlines transports roughly 86.13 million passengers a year on international and domestic flights, ranking it third in the world. It is ranked fourth amongst domestic carriers, transporting over 65.77 million passengers domestically each year. If the number of passengers stayed the same, the union would transport over 41.37 million passengers internationally each year, which would bring DAL from eighth in the world, to third, coming in just behind Lufthansa's 44.46 million passengers a year and Ryanair's (RYAAY - Get Report) 71.23 million passengers.
This brings up some concern that a Delta-American combo would draw scrutiny from anti-trust officials. However, the Wall Street Journal writes, "Delta has conducted an antitrust analysis and believes with concessions, it would have a good chance of obtaining regulatory approval."
US AirwaysUS Airways, part of the Star Alliance, is open to being a buyer or a seller, and reportedly has considered teaming up with American Airlines. After all, it is not as if LCC hasn't considered partners or acquisitions in the past. LCC itself is the product of a merger between the old US Airways and America West Airlines in 2005. Shortly afterward, in 2006, LCC made a hostile bid for Delta worth $8.7 billion, but the deal fell through. More recently, in 2010, the company was in talks with United Airlines, but the latter opted to partner with Continental instead, forming United Continental (UAL - Get Report), the airline stock popular with Ed Shapiro and Paul Reeder's
PAR Capital Management.
If LCC and American Airlines partnered together, the union would be on par with Delta or UAL. The merger would increase the volume of passengers carried on domestic flights to over 111.30 million a year, just enough to nudge Southwest out of the top domestic spot. The volume of passengers carried internationally would go up to just under 30 million, pushing the union to the sixth spot amongst international carriers.
Airlines Under PressureThe airlines are just in talks right now. Any deal would be at least a year in the coming, but the pressure is clear. There has been a string of mergers and acquisitions in the air travel industry over the last seven years as airlines seek to become more competitive, offering more routes and lower fares. The consolidations have helped airlines survive money-losing routes, increased fuel costs and tightened control on hub airports, but it has also significantly reduced the number of major US carriers.
Case in point, United Continental announced in early November a range of new international flight routes that will launch in the first half of this year. These new routes were included in the company's previously announced capacity guidance. "Since our merger last year, the new United's unmatched global route network and U.S. hub structure have allowed us to offer our customers more flights to more places they want to go," said Jim Compton, executive vice president and chief revenue officer. "By adding these new international routes, we continue to put the right aircraft in the right markets to serve our customers' needs." Delta and US Airways may be trying to follow in UAL's footsteps.