Delta exec: Airline still weighing whether to buy another carrier

ATLANTA - Delta Air Lines Inc.'s evaluation of whether it would make sense to purchase another carrier is a 'front-burner' issue for the nation's third-largest airline, a senior executive said Wednesday.

'I think there's value there,' President and Chief Financial Officer Ed Bastian said of consolidation during a New York investor conference that was carried on the Internet. 'We just need to find the right transaction for the constituency. If we do find it, we'll certainly consider it.'

On the flip-side, Delta recognizes that buying another airline could have considerable financial costs and cause friction among employees, Bastian said.

Bastian was noncommittal on how long the review process would take the Atlanta-based airline to complete, nor what Delta's ultimate decision will be. But, he did say that deciding whether to acquire another carrier is on Delta executives' minds.

'It's a front-burner issue for us,' Bastian said.

Bastian said Delta believes the consolidation question should be answered before the airline considers whether to sell or spin off any of its ancillary businesses, such as its growing maintenance, repair and overhaul unit.

'We'll be smart, we'll be knowledgeable about what the opportunities are, but I think we want to answer the consolidation issue first,' Bastian said.

The airline has said previously it is considering shedding regional feeder carrier Comair, but it has been mum on any talks it may be having.

On other issues, Bastian said Delta has been pleased with its results of late despite the persistently high cost of fuel. He said that next year, Delta expects growth in its domestic business to be strained, while growth internationally is expected to be strong.

Bastian said Delta would have to re-evaluate its business model for next year, particularly on the domestic side, if oil in the range of $100 a barrel persists.

Bastian also said that Delta continues to negotiate creditor claims following the airline's emergence from bankruptcy earlier this year. The airline has roughly 400 million shares outstanding, of which about 110 million continue to be held back pending final resolution of claims, Bastian said.

Earlier Wednesday, Delta said it has formed a partnership projected to generate $1 billion in revenue over 10 years for its maintenance, repair and overhaul unit and the parts manufacturer Chromalloy Gas Turbine Corp.

Delta said the deal with Chromalloy will be a boon for Delta's TechOps division.

Chromalloy will manufacture lower cost alternative parts that Delta can use to repair and overhaul engines, Delta spokeswoman Betsy Talton said. Currently, when Delta repairs an engine it typically gets parts for the repair from the original equipment manufacturer, though it has used non-original manufacturer parts in the past, Talton said.

The partnership is expected to generate $1 billion in revenue that the two companies will share, Talton said.

Delta said the deal will add the CFM56-5 engine type to the list of engines that TechOps services. Delta said that engine type is the engine of choice in Airbus aircraft.

The deal also includes the parts development program and 250 engine overhauls to be performed by Delta TechOps employees over the term of the agreement.

Delta said its maintenance, repair and overhaul unit took in more than $310 million in revenue last year. In addition to providing maintenance and engineering support for Delta's fleet, TechOps serves more than 100 aviation and airline customers from around the world.

Chromalloy is New York-based Sequa Corp.'s largest business unit.