Northwest Airlines Boeing 757
There has been a lot in the news about airline mergers and buy outs. Delta & Northwest, United & Continental and most recently AirTran & Southwest. Some in the media throw around “merger” and “takeover” interchangeably, but they are very different. When two airlines come together, there are two types of sale agreements: the merger and the takeover.
I got an email from a reader (thanks Jay) asking about the difference between an airline merger and take over. I am not a financial professional, but I want to try my best to point out the major differences. If you have any more to add, please feel free to leave a comment!
This is when two companies come together blending their assets, staff, facilities, and so on. After a merger, the original companies cease to exist, and a new company arises instead. Sometimes the new entity will take the name and brand from one of the airlines, but sometimes an entirely new brand can be created.
Delta and Northwest merged, leaving the Delta brand. United and Continental merged, which will leave the United brand. In mergers like these, management needs to work hard to come to certain agreements, figure what/who will be cut and how the new airline will operate. Of course, this can be a very complex process for both airlines to undertake.
TAKE OVER / BUY OUT / ACQUISITIONS
In a takeover, a company is purchased by another company. The purchasing company owns all of the target company’s assets including company aircraft, trademarks, routes and so forth. The original company may be entirely swallowed up, or may operate semi-independently under the umbrella of the acquiring company.
In the case of Southwest buying out AirTran, the AirTran brand will disappear and be absorbed by Southwest. It is not a merger and Southwest will own the assets of AirTran and have complete control. This process is easier than a merger, since management at Southwest has the final say, but they need to successfully share their culture with the employees at AirTran and make sure they feel welcome.
Alright, I hope that helps some! Image: fiveholer
Sun Country Boeing 737-800 (N807SY) taken at SEA.
The rumors surrounding Sun Country’s buy-out have been circulating for quite sometime. I have heard that Delta, AirTran or Southwest might be good candidates for a take over. Out of those three, Southwest seems the most likely.
I spoke with representatives from all three rumored buyers and they each had their own unique way of telling me, “no comment.” That was totally expected, since either they honestly have no interest or this is a hot topic and one of them is not ready to let the cat out of the bag. I have spent the last few days trying to get a hold of someone at Sun Country, but with no success. Either this is a topic they want to avoid or they aren’t so keen talking to bloggers.
Sun Country is based at Minneapolis-Saint Paul International Airport (MSP), which Southwest has recently started to fly into. This being a new market, presumably Southwest would want to be able to grow rapidly. With the recent merger of Delta and Northwest (which was based at MSP), there could be Northwest loyalists who aren’t wanting to start flying Delta and looking for a new airline to LUV.
There is also fleet similarities between Sun Country and Southwest. Sun Country flies Boeing 737-700 and -800’s, while Southwest is just steps away from starting to fly the larger -800 among other versions of the 737. Southwest has been looking at flying internationally and taking over Sun Country would allow them to quickly start. Since Southwest is installing satellite based ROW 44 internet, they would have an advantage over other low cost carriers that fly internationally.
Sun Country recently came out of bankruptcy by creating a viable business plan. Although the airline publicly states they feel confident with their future, this would be a good time for another airline to take them over. Sun Country has announced they will be purchasing new aircraft, expanding routes and hiring 100 new employees. That confidence is good for Sun Country’s future and should make them a better value for possible buyers.
Southwest might also want Sun Country to make their books look better. Since Sun Country flies mostly to leisure travel destinations from the very cold MSP, the first quarter is their best. However, the first quarter is Southwest’s weakest. Combining the two is like completing a financial puzzle.
So most things look like a great match. However, there are always two sides to a story and I spoke with Steven Frischling, who writes the blog Flying With Fish, and he sees some issue with this match up. First, purchasing Sun Country wouldn’t mean that Southwest would be getting their aircraft, “While many look at Sun Country’s fleet as compatible with Southwest Airlines, especially with Southwest announcing that they are exploring the 737-800, Sun Country does not own its fleet. All of its 737-700s & -800s appear to be leased. So a purchase of Sun Country would not include aircraft,” he explained.
He also points out that one of the major reasons airlines will buy out another airline is to get slots at a particular airport. However, slots are not that difficult to get at MSP and Southwest wouldn’t need to buy an airline to increase flights. “Sometimes buying an airline for landing slots, fleet, routes or gates makes sense,” Frischling stated. “While Southwest Airlines is changing how it does business, Sun Country offers Southwest Airlines nothing. The airline is not even a competitor.”
So, this might only be a rumor and nothing will come of it, but it is always fun to think about. The old Southwest probably wouldn’t have any interest in Sun Country, but things have been changing over at the Dallas based airline. Will the new Southwest look to take over Sun Country and expand internationally? I don’t know, but I wouldn’t be surprised if they did.
MORE OPINIONS: Image: Drewski2112
* Ben Mutzabaugh with USA Today
* Terry Maxton with Airline Biz Blog
The old and new combined livery for Continental and United Airlines
When United and Continental announced their new combined livery, a lot of people were not happy about the font used for “United.” Well, they must have heard, b/c they have changed the font and I like it!
From their merger site: “The new logo displays the combined company’s brand name in capital letters (UNITED) in a custom sans-serif font, joined with the global mark which has represented Continental’s brand image since 1991.”
This doesn’t help those that will miss the United tulip, but I think this is a good compromise for both brands.
A United/Continental possible livery on a Boeing 747-400
A lot of talk about United Airlines and the Continental merger. There are quite a few people that aren’t too happy with the new combined livery of the new United Airlines. A while back I found a site that allows people share their photoshopped liveries and a few interesting ones have popped up for a combined Continental and United Airlines livery.
Be sure to check out their site for other possible combinations. Image: Jetabout via Aviation-Designs.net
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