We've been running through our financial models here in DealBreaker HQ. Okay. Not really. We've been doodling on cocktail napkins at Harry's while we enjoy our liquid lunch. But we've none the less managed to uncover one potentially valuable and unreported synergy in the Delta-US Airways merger.
The two airlines have three recent bankruptcies between them—and after the merger both will continue to face challenges from fuel costs, employee costs, competition from cut-rate carriers and terrorism risks. So there's a not to far-fetched chance that the combined company will face bankruptcy again.
And you know what? Bankruptcies are expensive. Everyone—debtors, creditors, purchasers—hires lawyers, and the lawyers get paid out ahead of almost everyone else. So next time around, instead of paying two sets of lawyers for Delta and US Airways, they can pay just one. Synergy, baby, synergy!
Posted by Lee D , Nov 15, 2006 2:26PM
Well put, Mr Carney.
Posted by Cheezy Peas , Nov 15, 2006 2:31PM
I'd like to uncover her hidden delta synergies...
Posted by John Carney , Nov 15, 2006 2:35PM
Lee,
Just saw you anticipated my post. You make a great point there. Thanks for your comments. Keep them coming. I'm very happy we have some of the best commenters on the internets!
--JC
Posted by Timothy Price , Nov 15, 2006 2:59PM
Drinks for lunch at Harry's? When did you start hanging out with Bateman and the guys from P&P?
Posted by John Carney , Nov 15, 2006 4:47PM
Yeah. Sorry for living the cliche. We were working out of our Wall Street base station this morning, so we decided to make a trip down to see Nick the bartender.
Posted by AG , Nov 16, 2006 8:19AM
Absolutely fantastic.
This sector has destroyed more value than any other in the last 50 years.
The only people who make money out of the airline industry is the oil industry
Great call JC.
Posted by AG , Nov 16, 2006 8:20AM
Sorry.. there is one other industry that makes money out of it as you mention... the bankruptcy lawyers!!
Posted by Lee D , Nov 16, 2006 9:51AM
John, you guys do great work! Above and beyond the great info and analysis, your introduction of the expression "fighting like ferrets" leaves me with a debt I can never repay.
http://businessopinions.blogspot.com/2006/11/sony-divisions-fighting-like-ferrets.html
Posted by LeeD , Nov 20, 2006 5:15PM
On the subject of airlines, Air Canada re-emerged from it's court-ordered cocoon on November 17, and it's share price on TSX (symbol AC.A) has been on a steady, stately slide downhill ever since as the market looks around, trying to find a bigger fool.
http://www.canadianbusiness.com/markets/stocks/article.jsp?content=20061120_83096_83096