The revived merger between Delta (NYSE:DAL) and Northwest (NYSE:NWA) is based on the premise that, in a airline industry depression, two carriers mashed together work better than if they remained independent. It is an argument which is half again too clever but has no merit to speak of.
According to The Wall Street Journal "The deal could value Northwest at roughly $3 billion, these people said, though terms were still being negotiated. That would be well below Northwest's market value of more than $4.6 billion as of Feb. 1, reflecting the industry's worsening prospects in recent weeks." The airline industry has been keelhauled to the extend that United (NASDAQ:UAUA), Northwest, and Delta have lost over 30% of their market caps in three months.
The two significant stimulations for airline mergers now are rising fuel prices and a likely sharp drop in passenger demand as the economy slows. Since a merger will not be effective finished for several months, neither of these is addressed in the short-term.
For the rest of the story go to 24/7 Wall St.
