Tags: Delta | Interest | AMR

Delta Shares Rise on Report of Interest in AMR

Thursday, 12 Jan 2012 03:27 PM

Shares of Delta Air Lines Inc. rose Thursday after a report that the world's second-biggest airline is interested in bidding for American Airlines parent AMR Corp.

The Wall Street Journal reported that Delta and buyout firm TPG were separately looking at AMR, which is in the early stages of reorganizing through the bankruptcy process.

Delta and AMR declined to comment.

Three big mergers since 2008 have helped the airline industry by reducing competition and making it easier to raise prices. In one of those deals, Delta bought Northwest.

American missed out on the merger mania and fell from first to third among the world's biggest airlines by passenger traffic. US Airways Group Inc., which tried to buy Delta out of bankruptcy in 2006, is widely viewed as a possible bidder for AMR. US Airways declined to comment.

Delta shares rose 34 cents, or 4 percent, to $8.95 in afternoon trading. The stock has traded between $6.41 and $12.81 in the past 52 weeks.

Standard & Poor's airline analyst Jim Corridore doubts that regulators would let Delta buy American. He said the combined airline would be too big even if it sold some assets. Delta was briefly the world's biggest airline until United combined with Continental in 2010.

Corridore added that absorbing AMR "would be a big management distraction" for Delta.

It could be months before American's fate is clear. AMR management has the first chance to present a reorganization plan to creditors, after which rivals could present proposals to creditors and the bankruptcy judge in New York.

Thomas Horton, who became AMR's CEO the day before it filed for bankruptcy, has indicated that he wants American to emerge from the process as an independent airline with lower costs.

AMR and several subsidiaries filed for bankruptcy protection Nov. 29 after posting $11 billion in losses since 2001. AMR was the only major U.S. airline to lose money in 2010 and is expected to report a loss for 2011. It has been hurt by heavy debt, high labor and pension costs, and an aging fleet of gas-guzzling planes.

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