Remember when we said in December that this year would bring some major changes in the airline industry? Well, if this week is any indication of how the rest of the year is going to shake out, it will be even livelier than we thought.
Unless you live in a cave (don't laugh, some do), you are aware that after we
broke the story about
seeking to acquire
America West Airlines
on Wednesday, the doors have literally blown off the sector.
Everywhere you turn, analysts are chiming in on what they think of the proposed merger, various industry officials are expounding the evils of mergers, and officials with the
Department of Justice
are reminding us all that they will take a "long, hard look" at any such deal. Some airlines are adding their two cents about how "bad" this would be for the industry (uh-huh), while other airlines are admitting that they too are guilty of "talking" to America West (heavens, no!).
Guess which airline is now, once again, the lowest-hanging fruit on the buyout tree? Yep -- Alaska Air.
And if we thought the rumor mill was bad before, the level of activity in the past two days has been choking. Here's an update: As we said on Wednesday, United is interested in acquiring America West mainly because it is concerned about
beefing up its West Coast presence through the recent purchase of
Let's now switch sides: Because it is also now clear that American is very worried about this possible United/America West deal, guess which airline is now, once again, the lowest-hanging fruit on the buyout tree? Yep --
American, which has been tightening its marketing alliances with Alaska over the past month both directly and through its OneWorld partner
, would appear to us now to be on the verge of trying to do a deal with Alaska. Sources have been telling us for the past two weeks that American has been "exploring" the situation quite seriously with Alaska.
But Alaska, as other potential suitors have already found out over the years, is one hard nut to crack. If American is convinced that UAL is going to snare America West, we suspect American just may find a bigger nutcracker.
If American is convinced that UAL will make a bid for America West, a potential merger deal between American and Alaska can't be that far behind.
No, we didn't say it all made great financial sense -- it blurs even further the line between ego and financial strategy. Take the most self-serving remark of the new year, yesterday's statement by
CEO Gordon Bethune: "The probability of United, the largest carrier in the West, merging with America West, the third-largest carrier in the West, is closer to zero than any other number."
This is the same man who is the head of the fifth-largest U.S. carrier, who just happens to be waiting on approval from Justice to merge with the fourth-largest U.S. carrier.
We think Bethune is doing just what he should do: rant and rave and threaten. And no doubt Continental does hold a trump card. The airline owns 8% of America West's voting stock, and it also has the right of first refusal to buy the controlling stake in America West, which is held currently by David Bonderman's investment firm,
But no, we don't think that a merger of this size would automatically be given a thumbs down from the feds. And no, we are not so sure that the political intrigues involving Bonderman and his tangled web of airline investments could not be negotiated. Money -- especially lots of it -- can and does make folks do some amazing things.
Oddly enough, about the only folks who are
talking about the proposed deal are the potential newlyweds, United and America West. The steel door has slammed shut: Our sources have told us of receiving "career-ending" threats if they are even thought to be discussing the deal.
Obviously United did not want news of this to go public. Not only did the disclosure shoot shares of America West north at a nice clip, but the deal is now being trashed left and right before it even has a chance to be voted on by the UAL board.
And yes, we knew that America West and
Delta Air Lines
had also been "talking" of late, but our sources had indicated a few weeks ago that talks with the folks from Atlanta were on hold -- UAL was now center stage.
And finally, in what was probably the most off-the-wall addition to the current frenzy,
CFO Gary Kelly said in response to a question on the airline's conference call yesterday that he did not rule out the possibility of Southwest going after America West, "especially given that the industry seems to be in an aggressive mode of consolidation."
Just so you know -- when Southwest starts talking mergers, things are really getting crazy.
Holly Hegeman, based in Dallas, pilots the Wing Tips column and the Traveling With Wings column for
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At the time of publication, Hegeman owned shares of Southwest Airlines, though these holdings may change at any time. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at www.planebusiness.com. She welcomes your feedback.