US Airways/Delta

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Is Doug Parker flying too close to the sun? Having still not finished integrating America West into US Airways – which he bought out of bankruptcy last year – he is already after a bigger challenge. His bid for bankrupt Delta is also hostile.

There are serious risks. By making his rejected offer public, Mr Parker could unleash forces beyond his control. After all, Delta creditors will want to maximise their returns and are likely to sound out other potential partners. Deals out of bankruptcy are notoriously complex. The reaction of regulators is unpredictable. And there would be the usual integration risks of putting two large airlines together. His success so far with America West/US Airways has been during a rare sweet spot in the airline cycle, with improved traffic figures and rising prices helping to boost profitability after some very tough years. That might not continue.

However, US Airways’ merger experience counts for a lot. And the benefits on offer make it worth the leap. If US Airways can agree a deal to buy Delta before it emerges from bankruptcy, it claims there are savings of about $1.65bn a year on offer. The capitalised value of those dwarfs the estimated premium of 25 per cent being offered to Delta creditors. There could also be a positive knock-on effect on ticket pricing because the combined company would remove about 10 per cent of its least productive capacity. That impact would be magnified if other airlines saw this as a signal to attempt similar deals.

Securing a deal will be tricky, and there is a danger that employees will claw back a chunk of the benefits when they renegotiate labour agreements in a few years. But given Mr Parker’s record, his lofty ambitions should not be discounted.

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