Deutsche Lufthansa AG’s Thursday announcement that it would invest $305 million for a 19% stake in U.S. discounter JetBlue Airways Inc. rekindled in some circles talk that a deal might be brewing between two other, seemingly unrelated, U.S. airlines: Delta and United.
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Delta and United were linked in November after activist investor Pardus Capital Management LP, owner of stakes in both airlines, sent a letter to Delta management urging the two companies to combine. Despite an Associated Press report that the airlines were closing in on a deal, both airlines denied any negotiations were ongoing.
Those denials, coupled with perception that there would be significant hurdles to a deal, seemingly put the merger talk to rest. But at least one industry source, speaking on background, said that Lufthansa’s investment could clear one of those potential hurdles and make a Delta/United tie up more likely. Specifically, some have worried that Delta’s strong link to Air France in the SkyTeam international alliance would create conflict with United’s partnership with Lufthansa in the rival Star Alliance. With the lucrative U.S. market a key to all of the international alliances, neither Air France nor Lufthansa seemed likely to allow an important partner end up in the hands of a rival.
In that light Lufthansa’s investment in JetBlue could be seen at the very least as an insurance policy in the event of a Delta/United deal, if not a proactive step to develop a new partnership for once a deal is done. Though Lufthansa and JetBlue stressed they have no plans as of now to cooperate on flights (a point made repeatedly perhaps not to ruffle feathers at United), JetBlue along with existing Star partner US Airways could together offer Lufthansa an alternative to access the U.S. market should United join with Delta in SkyTeam.
Company officials discounted such talk, saying that the deal was inspired more by JetBlue’s need for liquidity and Lufthansa’s desire to capitalize on the weak U.S. dollar and depressed U.S. airline equity prices. But with airline investors keyed in on deal talk in advance of a hoped for wave of consolidation, it should come as little surprise that any transaction would cause minds to wander to other dealmaking possibilities. — Lou Whiteman
See JetBlue's press release
See JetBlue story from TheDeal.com
See TheDeal.com story on Delta/United rumors
