Airline Chiefs Ponder: Merger Wave or Ripple?

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By Del Quentin Wilber
Washington Post Staff Writer
Thursday, December 7, 2006

When US Airways made its unsolicited takeover bid for Delta Air Lines last month, it jolted the recovering airline industry and sparked talk about a wave of potential mergers.

Analysts and executives started dreaming up potential partnerships involving the nation's six traditional carriers: Continental, American, United, Delta, US Airways and Northwest.

US Airways is trying to convince Delta's creditors -- the carrier is in bankruptcy protection -- that its deal would create a lean and powerful airline. Delta is fighting the proposal and plans to unveil its reorganization plan in the coming weeks.

In interviews, chief executives at four major airlines and two of their low-cost competitors offered their views on whether the industry is poised for a wave of mergers.

American Airlines

Gerard J. Arpey, chief executive

Arpey declined to say what he thinks the future will hold for the industry or his carrier -- the nation's largest. But he said that one of American's biggest challenges in coming years will be to maintain its focus on reducing costs, especially as it is expected to earn its first profit in six years.

"Continuous improvement is the key to our future in the revenue and cost front," Arpey said. "We have to make sure the progress that we have made thus far does not diminish our appetite and enthusiasm for driving the company to a sensible net margin.

"You can get confused in this business that after years and years of losses, you make a little bit of money and that is enough to replenish your assets. It's not."

He added: "In any other normal industry comparison, we would have a long way to go."

Delta Air Lines

Gerald Grinstein, chief executive

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