US Airways Call to Delta a Defensive Move

After hearing that United Airlines and Northwest Airlines were interested in merging with Delta Air Lines, US Airways Chief Executive Officer Doug Parker this summer phoned the nation's No. 3 carrier to express his interest, too.

Nothing came of the courtesy call to Delta CEO Gerald Grinstein. But the purpose of the conversation was less about offense than it was defense, according to sources close to US Airways, which merged last year with America West Airlines to create the nation's fifth-largest air carrier.

Mr. Parker, hearing rumors about United and Northwest, did not want Delta to think that he was uninterested in a partnership simply because of the still-unfinished US Airways-America West combination, which will not be complete until 2007 at the earliest.

Delta, which does not expect to emerge from bankruptcy until next summer, declined comment yesterday on Mr. Parker's call, and a spokeswoman would say only that "Delta is focused on emerging from bankruptcy as a stand-alone airline" -- a statement that appears to rule out a merger at this time.

With the airline industry still smarting from more than $40 billion in losses since the 9/11 terrorist attacks and with several big airlines, including US Airways, making money again, many carriers appear to be exploring merger possibilities -- or at least testing the interest of their rivals -- as a way of solving the industry's periodic ills.

"Everybody is talking to everybody else," said longtime Virginia airline consultant Darryl Jenkins, who talks to carriers across the country. "There are a lot of conversations going on out there."

The only big old-line carriers ruled out as potential partners, according to Mr. Jenkins, are American Airlines (too big, as No. 1, and still smarting from a difficult merger in 2000 with TWA) and Alaska Airlines (wants to remain independent). The carriers making the most noise about consolidation appear to be US Airways, Northwest and United.

Northwest, like Delta, is bankrupt, and none other than U.S. Transportation Secretary Norman Mineta speculated out loud in January about a union between Minneapolis-based Northwest and Atlanta-based Delta. Northwest's most prized routes are to the Far East, while Delta's strong point is its Atlanta hub -- the biggest in the Southeast. A Northwest spokesman declined comment yesterday about any talks or possible combinations.

Chicago-based United, the nation's No. 2 carrier, recently exited bankruptcy protection and surprised analysts yesterday by reporting a second-quarter profit of $119 million.

And United Chief Executive Officer Glenn Tilton has talked openly about the need for more consolidation.

But no executive has been more vocal about the benefits of merging two troubled carriers than Mr. Parker, the US Airways CEO who first talked openly about his desire to consolidate with other carriers while running America West. He went after the assets of bankrupt ATA Airlines but lost a bidding war to Southwest Airlines. In 2005, he found a willing partner with US Airways, which needed help emerging from bankruptcy.

Now Mr. Parker may be after a bigger prize. The disclosure of his phone call to Delta, first reported Saturday by The Wall Street Journal, fits with comments Mr. Parker made to the Post-Gazette at the end of June, when he acknowledged an interest in either Delta or Northwest but noted that he and his team were not "actively" working on negotiations

Mr. Parker has not placed a call to Northwest as he did to Delta, a US Airways spokesman said yesterday.

Mr. Parker said in late June that "we can't ignore" the opportunity of combining with either airline -- both of which have the opportunity in bankruptcy to dramatically lower their costs by giving unneeded airplanes back to lenders or renegotiating labor contracts, just as US Airways did in 2003 and 2005.

If Delta or Northwest look for a merger partner on the way out of bankruptcy, as US Airways did, "we will be there to talk to them," Mr. Parker said in late June. Last week, in a conference call with analysts, Mr. Parker reiterated that point, saying "we would have to be there or we wouldn't be doing our jobs."

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