S&P: Delta bid may trigger airline consolidation

Standard & Poor's said that the $8 billion unsolicited acquisition offer that US Airways Group Inc. (B-/Watch developing) made for Delta Air Lines Inc. (rated D) could signal the long-predicted next round of U.S. airline industry consolidation.

If the proposed combination occurs, it may prompt one or more mergers involving Northwest Airlines Corp. (also bankrupt, rated D), UAL Corp. (B/stable) or Continental Airlines Inc. (B/stable/B-3).

Those three airlines are also potential competing bidders for Delta, according to the agency.

"If US Airways succeeds in combining with Delta, we would expect UAL to renew its overtures to Continental," said S&P credit analyst Philip Baggaley.

"A potentially significant obstacle to such a bid, though, is Northwest's right to block any merger involving Continental, which dates from Northwest's 1998 'white knight' bid for an eventual controlling interest in Continental, launched in response to Delta's offer to acquire Continental."

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