US Airways seeking to purchase Delta

US Airways has just announced this morning that it would make an $8 billion bid (with cash and stock) for Delta Air Lines once the latter emerges from Chapter 11 bankruptcy protection. Delta creditors would get about $4 billion cash and and 78.5 million shares of US Airways stock which, based on yesterday's closing stock price, has a combined value of about $4 billion.

There isn’t much information available at this time, since the story was just released about an hour ago, but US Airways said that the deal would ‘generate $1.65 billion in annual synergies’. The combined airline would use the name of Delta, which according to US Airways' CEO, has a slightly higher brand awareness.

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Austrian Airlines to start Iraq service

Austrian flag carrier Austrian Airlines said today that it would start flying scheduled flights to the northern Iraqi city of Erbil twice a week, starting December 11. According to the airline, the city is the 4th largest in Iraq and it is a logical new destination for its extensive Middle Eastern network - the airline claims that it is 'already the number three carrier in Europe when measured by services into the Middle East'.

The flights are on Mondays and Fridays with an Airbus A319 from Vienna to Erbil and back (flights 829 and 830).

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Aeroflot lets 787 slots expire, retires Il-86

Russian flag carrier Aeroflot lost twenty-two production slots last week for the Boeing 787 aircraft because the government wouldn't approve its order. "The original conditions on the contract have expired... We will now be looking for other alternatives. We remain in contact with Boeing," said Aeroflot Deputy CEO Lev Koshlyakov.

Originally Aeroflot remained undecided between the A350 and the 787 and seemed like it would split its order both ways. Alexander Lebedev, owner of 30% of Aeroflot, cut a deal with Boeing to give it the production slots basically as a time extension so that Aeroflot's board could confirm the order, which it has yet to do.

Aeroflot also announced last month that it plans to retire the Ilyushin Il-86 from service later this month. Aeroflot's Deputy Director General Igor Desyatnichenko said that the planes will be retired November 15, and that they were "too costly to keep them through the winter and fly just two or three months in the summer". He also said that the planes, which aren't very fuel efficient, didn't meet European environmental and noise regulations.

The Il-86 was introduced in 1980 and was the first Russian wide-bodied airliner. Aeroflot and other airlines have used (and continue to use) the aircraft on tourist flights to southern resort towns in the Caucasus during the summer months.

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Reactions to FedEx's A380 cancelation

After FedEx's decision yesterday (see previous blog post) to cancel its A380 orders because of prolonged delays on Airbus' part, there have not been any other cancellations by other airlines ordering the A380 - as of yet.

Singapore Airlines, which will be the first airline to put the A380 into service, says that it has no plans whatsoever to scrap its order, although it will get its first A380 in October of 2007 instead of December of this year, as originally planned. The airline said that it won't be affected greatly by the delay because it's taking delivery of six Boeing 777-300ERs this month.

FedEx rival UPS, which has ten A380s on order (as well as options on another ten) said that the company isn't rushing to make a decision about whether to cancel its orders or not. "We are not pressed to make a decision," said Chief Executive Officer Mike Eskew. "Our backs are not against the wall on this issue." UPS says that it has enough planes scheduled for delivery in the next few years to avoid any problem.

Airbus company EADS also reported its first quarterly loss in three years earlier today.

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FedEx Dumps Airbus, Goes to Boeing

Cargo delivery giant FedEx announced today that it has canceled its order for 10 A380-800F planes and instead has ordered 15 Boeing 777 (777F) freighters. Notably, this is the first A380 customer that Airbus has lost.

CEO Frederick Smith said, "The availability and delivery timing of this aircraft, coupled with its attractive payload range and economics, make this choice the best decision for Fedex." He went on to say, "Global demand for air cargo and express services continues to grow rapidly and FedEx has made significant investments in our network to meet customers' needs and fulfill our business objectives. Therefore, it was necessary and prudent for us to acquire the Boeing 777 Freighter." Simply put, FedEx needs new planes soon, not later, and if Airbus can't deliver, then they figure that Boeing will.

Right now I'm sure everyone at Boeing headquarters in Chicago is partying, but not the same in Toulouse, France - Airbus headquarters. Airbus has been facing some tough times recently, with Emirates threatening to cancel its order for 43 passenger A380s (the largest customer of the plane to date). Right now, the scheduled first delivery of the A380 to an airline will be in October 2007 - two years behind schedule.

Deliveries of the aircraft to FedEx are expected to start in 2009 and last through 2011. At the time of writing, shares of Airbus parent company EADS fell 3.05% while Boeing shares climbed 5.26%

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Aer Lingus Says 'No' To A Ryanair Takeover

Irish 'flag carrier' (this term his been disputed) Aer Lingus has recieved, and promptly rejected, a $1.9 billion (£1 billion) takeover offer from low-cost archrival Ryanair. The reason? The bid "significantly undervalues the group's businesses and attractive long term growth potential", according to the Aer Lingus board. Of course, the real reason could be that Aer Lingus, which has a rich history as a full-service, international airline, doesn't want to be bought out by Ryanair, which has gone from being a dowdy puddlejumper of an airline to one of Europe's largest in a little over ten years.

Michael O'Leary, Ryanair's outspoken boss, called the potential takeover a 'strong opportunity' to create a new airline that would carry over 50 million passengers a year. The airlines would, however, be operated seperately, and in some cases even compete on some routes.

The Irish government could also be an obstacle to any future plans that Ryanair may have regarding an Aer Lingus takeover. It owns 28.3% of Aer Lingus, and although Ryanair has said it would be 'happy' if the government kept its shares, I'm not sure whether the government would be happy to see itself holding 28.3% of an airline that has frequently clashed with governments in other countries.

The deal might also have had some problems with the anti-trust groups: a combined Aer Lingus-Ryanair coalition would carry a huge 78% of passengers between London and Dublin.

The two airlines, though, aren't as different as some think. Aer Lingus used to be a mostly full-service airline, yet in the past five years it has significantly changed its business model, cutting back on some services and opening new routes to mainland Europe (before, it flew primarily to England and the US). Now, Aer Lingus tries to market itself as a low-fare airline, much like Ryanair.

Could a takeover still happen? If it did, Ryanair would have to significantly boost its purchasing price. (It already owns 16% of Aer Lingus.) And the combined group would have to drop some routes and/or frequencies to avoid trouble with anti-trust agencies.

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A380 Faces More Delays as Customers Rethink Purchases

Just when the news over at Airbus couldn't get any worse - lagging behind Boeing in the orders count, A380 delays, etc. - it did. Airbus confirmed recently that the A380s scheduled to be delivered to customers will be further delayed due to 'wiring problems'. The planes will be delayed another year.

Emirates, the largest customer of the type, will have to wait an addition ten months for its planes, something that it's president is not too happy about: "It's a very serious issue." Emirates, along with Virgin Atlantic, have announced that they are 'reviewing' their options - meaning that they might order fewer or potentially none of the airplanes.

Airbus earlier had said it would deliver nine A380s next year - a number that's now down to 9. Delays are, in total, two years late - meaning parent company EADS is losing billions. And this comes at a critical time, too, as Airbus tries to regain the lead from archrival Boeing.

Will Emirates really cancel its A380 order like some have predicted? Not likely. The airline has, after all, gained much publicity over its huge A380 order (43 aircraft), which is the largest so far. The second largest order, from Lufthansa, is only 15 aircraft. That said, whether Emirates cancels or not, Airbus is still in quite a bit of trouble for the time being.

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