The argument that airline mergers improve profits is debatable. Combinations doe not save on fuel costs. Unions often use the marriages as ways to get wage concessions. The last thing a new airline needs is a series of strikes. Customer service is usually hurt as two large carriers put together reservation systems and IT.
Chapter 11 does offer airlines that chance to renegotiate and eliminate debt. Courts can also face down unions by mandating lay-offs.
Delta (DAL) and Northwest (NWA) are going back to the negotiating table to try to craft a marriage, according to the FT. The pilots union, which torpedoed that last deal, will be left on the sidelines. The theory is that they will come along if they see the economy turn against the companies.
And, conditions are getting worse with a vengeance. Fuel prices are still rising. Oil moved toward $107 again today. Passenger traffic will fall as travelers feel the vice close on their pocketbooks due to a deepening recession. In the face of that, even a merger may do the two companies no good.
They can go into Chapter 11 as a combined company instead of separately.
Douglas A. McIntyre