Saturday, April 19, 2008
© Copyright 2014
Gwinnett Daily Post
ATLANTA - Weary shareholders and creditors of Delta Air Lines Inc. and Northwest Airlines Corp. could lose out - again - amid falling stock prices since the carriers announced their intent to combine.
A bidding war for either of the airlines started by another carrier or a private equity firm could help. But observers say that's not likely, given the risky business of investing in airlines these days.
Soaring fuel prices have hit all airline stocks hard, but especially Delta's and Northwest's after they said this week they do not plan to cut capacity further or close any of their hubs as part of the deal.
That approach may make it hard to realize their goal of 'earning a return for shareholders who have committed their capital.' Analysts predict Delta and Northwest will eventually have to cut more capacity.
'In an environment of $115-a-barrel oil, much more is going to need to be done to restructure the industry,' said Calyon Securities airline analyst Ray Neidl.
The two airlines' shareholders and creditors, who include employees and big mutual funds, have suffered years of losses.