A bad economy has curtailed travel, forcing airlines to cut ticket prices to sell seats. Meanwhile the fuel bill is on the rise, and the credit crunch has left the highly leveraged companies unable to tap capital markets, leaving the airlines scrambling to cut costs, trim schedules and hope their dwindling cash piles can outlast the slowdown.

2010

July 1: Delta Air Lines Inc. plans to sell two wholly owned regional affiliates, Mesaba Airlines unit to Pinnacle Airlines, for $82.5 million, continuing the streamlining process it began after its 2008 acquisition of Northwest Airlines Corp. - Lou Whiteman

May 24: Capitol Hill hearings begin this week on the controversial proposed $3.2 billion merger of Continental Airlines Inc. and UAL Corp.'s United Air Lines Inc. On Thursday the Senate's antitrust subcommittee, headed by Sen. Herb Kohl, D-Wis, will examine the financial state of the airline industry and the potential impact of consolidation, according to the committee's website. - Donna Block

May 6: Rep. Jim Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, calls on the Obama administration to stop the deal between Delta Air Lines Inc. and US Airways Group Inc. "I strongly urge the DOJ to demonstrate its commitment to vigorous antitrust enforcement and healthy competition in the airline industry by disapproving" the proposed deal, Oberstar said in a letter to Assistant Attorney General Christine Varney at the Department of Justice.

May 4: The Department of Transportation rejects a counteroffer submitted by Delta Air Lines Inc. and US Airways Group Inc. to try to win approval for an asset swap, announced in August, throwing into doubt the airlines' deal to exchange operations in New York and Washington. - Lou Whiteman

May 3: The parent of United Airlines Inc. is expected to announce a $3.2 billion stock deal to acquire Continental Airlines Inc., marrying two carriers with complementary networks to create the world's largest airline. - Lou Whiteman

Apr. 30: The flight plan for a merger between the parent of United Airlines Inc. and Continental Airlines Inc., is agreed upon. Now it is up to Continental to decide whether to clear the deal for takeoff. - Lou Whiteman

Apr. 26: United Airlines and Continental Airlines Inc. continue merger talks, but, as the Wall Street Journal reports, the companies have hit a road bump: "disagreements have emerged over which share price to use for the stock-swap deal."

"If they can sort this out, the two airlines are well on their way to consummating a merger. If they can't, the talks will break down, as they did two years ago," the paper says.

Apr. 23: After a week of deliberations, the outcome of ongoing merger discussions between Continental Airlines Inc. and the parent of United Airlines Inc. appear to be coming down to the simple question of whether Continental's board and management are willing to pull the trigger. - Lou Whiteman

Apr. 16: While a merger has been discussed, Continental and United appear no closer to a deal than they were when they last talked in 2008 -- though things could accelerate in the coming days, according to sources. - Lou Whiteman

Apr. 8: United Airlines Inc. parent UAL Corp. and US Airways Group Inc. rekindle merger discussions, with the two sides exploring whether hurdles that have derailed previous consolidation efforts might now be overcome. - Lou Whiteman

Apr. 8: British Airways Plc and Iberia Lineas Aéreas de España SA's merger is cleared for takeoff. The share exchange, which was unchanged from an earlier memorandum of understanding, will leave British Airways shareholders with 56% of the combined company, which will be called International Consolidated Airlines Group SA. - Paul Whitfield

Mar. 9: Continental Airlines Inc. is evaluating the results of the 2008 merger of Delta Air Lines Inc. and Northwest Airlines Corp., and is open to considering merger opportunities itself if "it's in our bests interests to bulk up defensively," CEO Jeff Smisek said at a JP Morgan conference, according to Bloomberg.  

Feb. 26: Turkish Airlines Inc. says it is considering an offer for Polish carrier Polskie Linie Lotnicze LOT SA, confirming its place as one of three possible bidders for the troubled airline. Turkish Airlines is looking to increase its size but hasn't decided whether to bid for LOT, a spokesman for the Istanbul-based airline said. - Paul Whitfield

Feb. 10: Delta Air Lines Inc. and US Airways Group Inc. said late Tuesday, Feb. 9, they could call off a plan to swap assets in New York and Washington due to regulator demands that they sell a significant number of slots at the airports in order to win approval. - Lou Whiteman

Feb. 9: The Department of Transportation late Tuesday, Feb. 9, granted tentative approval to a deal between Delta Air Lines Inc. and US Airways Group Inc. to swap operations in New York and Washington.

Also on Tuesday, Feb. 9, Japan Airlines Corp. said that it would remain linked with American Airlines Inc., rejecting a potentially more beneficial offer from Delta Air Lines Inc. due to the risks involved in that rival bid. - Lou Whiteman

Jan. 26: The CEO of Delta Air Lines Inc. on Tuesday reaffirmed his belief that his airline's proposed alliance with Japan Airlines Corp. can pass antitrust muster, and insisted the tie-up would be superior to a rival offer from American Airlines Inc. even if immunity was denied. - Lou Whiteman

Jan. 19: Japan Airlines Corp. initiated the U.S. leg of its restructuring on Tuesday, Jan. 19, by asking a New York judge to officially recognize its overseas bankruptcy.  The airline also filed for bankruptcy protection in Japanese court Tuesday, taking the first step in a turnaround the Japanese government hopes will end the carrier's dependence on state loans and return it to profitability. ETIC, a state-backed fund, has agreed to spend about ¥900 billion ($10 billion) to finance JAL's restructuring. - John Blakeley and Paul Whitfield

Jan. 18: Investors dumped stock in Japan Airlines Corp. on Monday, sending the airline's shares to a record low ¥5 ($0.0550) ahead of an expected announcement tomorrow that the company will file for bankruptcy. Shares in JAL tumbled ¥2, or almost 29% on its previous close, taking the group's month-long decline to 93%, the day before a state-backed fund announces how it plans to restructure the airline. - Paul Whitfield

Jan. 12: American Airlines Inc. and TPG Capital increased their offer of direct financial support for Japan Airlines Corp. to $1.4 billion as shares of the struggling carrier plunged 45% on expectation that it was preparing to file for bankruptcy. The offer, which was announced in Japan by American Airlines CFO Tom Horton, includes $300 million of investment from the U.S. carrier and partners in its Oneworld alliance. The remaining $1.1 billion will be put up by buyout shop TPG of Fort Worth. - Paul Whitfield

Jan. 11: The government-appointed board charged with crafting a turnaround plan for Japan Airlines Corp. is reportedly leaning toward not accepting a capital injection from a U.S. carrier, a potential boon to Delta Air Lines Inc. in its bid to steal JAL away from an alliance with rival American Airlines Inc. - Lou Whiteman

Jan. 8: Japan Airlines Corp. shares slumped for a third day after the country's finance minister declined to reject widespread news reports that he will let the troubled carrier go into bankruptcy to facilitate its turnaround. The value of Asia's biggest airline by passengers tumbled almost 12%, or ¥9 per share, to close at ¥67 per share, matching a record low. The shares have lost a quarter of their value since Tuesday, when they hit a one-week peak of ¥90. - Paul Whitfield

Jan. 7: Japan Airlines Corp. will cut ¥730 billion ($7.83 billion) of debt and pension obligations, including about ¥300 billion of bank loans, from its books under a plan drawn up by a quasi-government fund that is likely to take control of restructuring. The Enterprise Turnaround Initiative Corp. of Japan, or ETIC, will also inject about ¥300 billion of new equity into the airline if it takes control of the restructuring, according to Japanese newspaper reports. - Paul Whitfield

That day, Reuters reported that American Airlines Inc. could increase its offer to invest $1.1 billion in Japan Airlines Corp. to ensure the airline sticks with their Oneworld alliance. AMR Corp.-owned American Airlines is looking at possibilities to make its offer more attractive, Will Ris, an executive in charge of government affairs.

Jan. 5: Japan Airlines Corp. continues to struggle through its government-backed restructuring. Tuesday's news is that pension fund members have voted in favor of cutting their benefits. - Kenneth Klee

Jan. 5: Regional airline operator Mesa Air Group Inc. sought bankruptcy protection Tuesday to shed excess aircraft and attempt to more quickly resolve ongoing litigation with partner Delta Air Lines Inc. Phoenix-based Mesa listed assets of $975 million and liabilities of $869 million as of Sept. 30 in filings made at the U.S. Bankruptcy Court for the Southern District of New York. - Lou Whiteman

Jan. 4: The value of Japan Airlines Corp. climbed by almost a third on Monday after the Japanese government doubled a credit line to the struggling carrier to ¥200 billion ($2.2 billion), easing concerns that the airline could fall into bankruptcy. - Paul Whitfield

2009

Dec. 31: Delta clears final regulatory hurdle in integration of Northwest: Delta Air Lines Inc. needed until the final hours of 2009 to complete one last resolution, saying Thursday that the Federal Aviation Administration had authorized it and merger partner Northwest Airlines Corp. to operate as a single carrier. - Lou Whiteman

Dec. 16: American Airlines offers Asian exclusivity to JAL: American Airlines Inc. has pledged to keep Japan Airlines Corp. as its exclusive Asian partner and hinted that it could throw more money at the Japanese carrier as part of its effort to keep JAL from defecting to a rival global alliance. - Lou Whiteman 

Dec. 14: Delta, American battle for JAL escalates: An "open skies" agreement reached between the United States and Japan to liberalize air service between the two countries ups the ante in an ongoing battle between two U.S. rivals vying to forge closer ties with Japan Airlines Corp. The tentative deal, widely expected, would free U.S. and Japanese airlines to fly between the countries without restriction. - Lou Whiteman 

Dec. 3: American, TPG offer Japan Airlines $1.1B investment: American Airlines Inc. and TPG Capital will invest as much as $1.1 billion in Japan Airlines Corp. if the struggling carrier sticks with its Oneworld alliance and shuns the attentions of Delta Air Lines Inc. and its SkyTeam alliance partners. The offer from American Airlines, whose parent entity is AMR Corp., of Fort Worth, is competing against a November proposal for Delta to buy $500 million of JAL shares or convertible stock. That offer also included a further $500 million of debt financing and guarantees. - Paul Whitfield

Nov. 23: BA to fly away with Qantas, too?: British Airways plc's CEO Willie Walsh told the Financial Times on Monday that he "could look again" at Australian flag carrier Qantas plc. Talks between the two airlines took just two weeks to fall apart at the end of 2008 because of differences over valuation. Qantas, which wanted control of any combination with BA, said it would turn its attention to partnerships with Asian airlines. - Paul Whitfield

Nov. 11: Republic continues Frontier/Midwest integration: Republic Airways Holdings Inc. took the next step in integrating its two summer airline purchases on Tuesday, announcing plans to shift jobs from Denver to Milwaukee as part of a broader buildup in Wisconsin. - Lou Whiteman

Nov. 11: JAL contest heats up: The CEO of American Airlines Inc. went public with his company's desire to preserve an alliance with Japan Airlines Corp. amid talk that a rival proposal by Delta Air Lines Inc. might be favored by government officials in charge of JAL's restructuring. - Lou Whiteman

Nov. 6: JAL talks with Delta, American heat up: The courtship of Japan Airlines Corp. has apparently gone into overdrive, with officials from AMR Corp.'s American Airlines Inc. and Delta Air Lines Inc. each lobbying Japanese government officials about the benefits JAL could reap from forging closer ties to each of their rival alliances. - Lou Whiteman

Nov. 2: Delta-Virgin Blue JV gets initial OK: Delta Air Lines Inc. and Australia's Virgin Blue Airlines Group received a three-year approval from the Australian Competition and Consumer Commission for a joint venture where they will coordinate operations between the U.S. and Australia, including on pricing, revenue management, schedules, capacity and routes flown. - Baz Hiralal

Oct. 21: Report: Japan Airlines needs $3B: A government task force working on a turnaround plan for Japan Airlines International Co. Ltd. will reportedly seek ¥300 billion ($3.3 billion) in new capital for the troubled airline from public and private sources. - Lou Whiteman

Oct. 5: JAL stake talks on hold: Japan Airlines Corp. has reportedly shelved talks with foreign airlines about a possible investment while the company works to finalize its restructuring plan. - Lou Whiteman

Sept. 28: JAL restructuring delay: Japan's transport minister over the weekend pledged not to force Japan Airlines Corp. into bankruptcy and to work with the struggling airline and advisers to map out a restructuring plan in the weeks to come. - Lou Whiteman

Sept. 25: Will Japan Airlines' hotel unit go on the block?: As Japan Airlines Co. Ltd. explores its restructuring options, the company seems likely to revisit an idea it has mulled at least twice in the last 10 years: selling its wholly owned hotel subsidiary. - Lou Whiteman

Sept. 22: Republic blends ops, not brands, after airline deals: Republic Airways Holdings Inc. is wasting little time integrating the operations of recently acquired Midwest Airlines and Frontier Airlines. Brett Snyder at Cranky Flier reports that as of November some of Frontier's larger Airbus 319 aircraft will be flying out of Midwest's Milwaukee hub under the Midwest brand. Not long after that, Republic's smaller Embraer 190 aircraft, which have been flying for Midwest for more than a year, will appear in Denver operating under the Frontier banner. - Lou Whiteman

Sept. 15: Air France-KLM pulls up at Japan Airlines gate: Add Air France-KLM to the expanding list of suitors interested in investing in Japan Airlines International Co. Ltd. The Paris airline is in talks to inject hundreds of millions of dollars in JAL as part of a broader alliance deal, according to Tuesday media reports. - Lou Whiteman

Sept. 11: Delta in talks on Japan Airlines stake: An aviation source on Friday confirmed reports out of Japan that Delta, the world's largest airline, has opened discussions with Japan Airlines International Co. Ltd. about a range of strategic options, including Delta potentially investing what reports say could be "hundreds of millions of dollars" to become JAL's largest shareholder. - Lou Whiteman

Sept. 10: Frontier Air wins plan confirmation: Frontier Airline Holdings Inc. has glided a step closer to its Chapter 11 exit after winning confirmation of its reorganization plan. Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan confirmed the Denver air carrier's plan on Thursday, according to a company statement. - Carolyn Okomo

Aug. 28: EC approves Lufthansa acquisition: The European Commission on Friday approved the acquisition of troubled Austrian Airlines AG by Deutsche Lufthansa AG after the German buyer agreed to reduce capacity at the target and limit growth. - Andrew Bulkeley

Aug. 26: Cost concerns slowing Air Jamaica sale?: It has been nearly two months since any word has come out about the privatization of Air Jamaica Ltd., which appeared back in early July on the verge of being acquired by the owners of U.S. discounter Spirit Airlines Inc. A consortium that includes Oaktree Capital Management LLC and Indigo Partners LLC, according to local reports, had bested Caribbean Airlines in the auction and was awaiting government approval to complete a deal.

A new report in the Jamaica Gleaner might provide an explanation for the silence in the months since. Prime Minister Bruce Golding said it will cost the government nearly $200 million to divest Air Jamaica, including about $30 million in "redundancy payments" and repayment of outstanding bills owned by the airline. "There are some expensive leases that it would be impossible to pass on as part of the transaction," Golding explained, saying his Cabinet is weighing whether such costs can be accommodated given "fiscal realities" of the current budget year. - Lou Whiteman

Aug. 21: Southwest hunting deals, but targets limited: Southwest Airlines Co.'s (NYSE:LUV) CEO Gary Kelly told The Wall Street Journal Thursday that his airline, fresh off losing a bankruptcy court-sponsored auction to buy Frontier Airlines Holdings Inc., could be in the market for another deal. - Lou Whiteman

Aug. 17: Republic leveraging its Midwest, Frontier buys: Republic Airways Holdings Inc., which bought Midwest from private equity firm TPG Capital last month and on Thursday night won a bankruptcy auction to acquire Frontier, said Friday it would eliminate about 100 jobs, or 9%, of Midwest's Milwaukee workforce. Midwest has been shrinking since selling to white-knight TPG in 2008, and is facing a competitive onslaught at its Milwaukee base from rivals AirTran Airways Inc. (NYSE:AAI) and now Southwest Airlines Co. (NYSE:LUV).

Aug. 14: Republic wins Frontier Airlines auction: Republic Airways Holdings Inc. late Thursday won an auction to acquire Frontier Airlines Holdings Corp., besting a higher offer from Southwest Airlines Co. to buy the discount air carrier. Indianapolis-based Republic's stalking- horse bid of $108.8 million was selected over a rival $170 million proposal from Southwest after the Dallas-based airline would not remove a contingency requiring the two airlines' pilots unions to quickly hammer out an integration deal. - Lou Whiteman

Aug. 12: Delta, US Air focus on strengths in asset swap: An announcement by US Airways Group Inc. (NYSE:LCC) and Delta Air Lines Inc. (NYSE:DAL) involving a swap of landing rights might not amount to the consolidation that some insist is necessary to create an industry viable in good times and bad. - Lou Whiteman

Aug. 7: Frontier, Teamsters agree on new pact: The pact, which is up for a union ratification vote on Aug. 20, would codify modifications to wage and benefits approved in October by Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. The pact also negates an appeal of the judge's order, the Denver airline said. - Carolyn Okomo and Lou Whiteman

Aug. 3: Southwest heavy favorite in Frontier fight: Frontier can count on bids from regional jet operator Republic Airways Holdings Inc. and rival Southwest Airlines Co. Though industry sources say that numerous other parties have investigated a potential bid for Frontier, the entry of Southwest into the auction appears to have tempered any additional interest. An auction is scheduled for Aug. 11. - Lou Whiteman

July 30: Southwest enters bidding for Frontier with $114M offer: Southwest Airlines Co. will give Republic Airways Holdings Inc. a run for its money after announcing its plans to prepare a rival bid worth a minimum of $113.6 million for bankrupt Frontier Airlines Holdings Inc. - Carolyn Okomo

July 15: Delta-Virgin Blue JV comes under fire from competitors: The first of what could be a number of potential challenges to a proposed joint venture between Australia's Virgin Blue and Delta Air Lines Inc. (NYSE:DAL) emerged on Friday, with Singapore's Tiger Airways Ltd. announcing plans to file a formal objection with Australia's competition regulators. - Lou Whiteman

July 10: Virgin America investor plans unlikely to end criticism: Virgin America Inc. has won initial approval to fly from the Department of Transportation after a prolonged fight by selling more than 75% of its equity to U.S. investors. - Lou Whiteman

July 10: Continental wins antitrust immunity to join Star Alliance: Siding with the airlines over objections from the Department of Justice, the Transportation Department on Friday granted Continental Airlines Inc. antitrust immunity to coordinate trans-Atlantic service with its Star Alliance partners. - Lou Whiteman

July 9: Delta and Virgin teaming on trans-Pacific flights: Delta Air Lines Inc. (NYSE:DAL) and the Virgin Blue Airlines Group are seeking approval for to pool revenue, collaborate to plan routes and introduce new products, and even to use one another's planes. Both Virgin and Delta have only recently begun flying U.S. to Australia routes -- Delta began just last week -- and the JV is designed to help them better compete with incumbents Qantas Airways Ltd. and United Airlines. - Suzanne Stevens

July 7: Spirit gets Air Jamaica: The private equity owners of discounter Spirit Airlines Inc. have reportedly won an auction to buy government-owned Air Jamaica Ltd., increasing their bet on travel to the Caribbean. A consortium that includes Oaktree Capital Management LLC and Indigo Partners LLC are set to privatize Air Jamaica after besting Trinidadian-owned Caribbean Airlines in an auction. - Lou Whiteman

June 30: United Airline's debt running on spare parts: Debt markets were so tight that in the $175 million debt offering of United Airlines' parent, UAL Corp. (NYSE:UAUA), the company was not only forced to pay a sky-high yield, but also to collateralize the bonds with spare parts for its planes. - George White

June 29: DOJ signals headwinds for airline deals: The U.S. Justice Department strongly opposes granting antitrust immunity allowing Continental Airlines Inc. to join the international Star Alliance. The DOJ's stance, outlined in a filing late Friday with the Transportation Department, is the clearest signal yet of the difficulties airlines will likely have if they contemplate dealmaking during the Obama administration. - Lou Whiteman

June 15: Consolidation looms as Paris Air Show opens: The Paris Air Show got going June 15 with the usual fanfare, but the outlook for the aerospace industry isn't bright, as The Deal Pipeline readers are aware. - Kenneth Klee

June 11: US Airways CEO still interested in airline deals: US Airways Group Inc. CEO Doug Parker on June 10 renewed his call for further consolidation of the airline industry, saying domestic carriers need to contract if the business is to stay viable and make money in downturns. - Lou Whiteman

June 4: United offers hope with plane order talk: Word that UAL Corp.'s United Airlines Inc. is shopping for up to 150 new aircraft is good news for both plane manufacturers and for fans of a once-proud airline that has taken it on the chin in recent years. - Lou Whiteman

April 29: Frontier on five-month roll: Although Frontier is bankrupt, it's seen five straight months of bluer skies as it records operating profits. - Carolyn Okomo

May 22: BMI investor sues Lufthansa: Michael Bishop hopes to force the German airline to honor a put option to buy him out. - Jonathan Braude This after, May 20: Lufthansa may walk away from BMI: The German airline wants British Midland's majority owner to pump in more capital. - Andrew Bulkeley

May 19: Pilots to lawmakers: Delay United/Continental alliance; May 15: US Airways: Pilot harmony still a distant destination.

March 17: German carriers consider alliance: Air Berlin and TUIfly may take 20% cross-shareholdings. - Andrew Bulkeley

(See more on alliances below.)

THINGS LOOKING GOOD FOR VIRGIN AMERICA?

May 13: Virgin America buffeted by rivals, economic slump: The startup is struggling to turn a profit during an industrywide downturn. - Lou Whiteman This, after: March 11: Does Virgin America have turbulent times ahead?

In mid-April: Ceske Aerolinie has two suitors; Japan Airlines seeks government funding; and Southwest posts loss, citing economic slump.

March 30: Air Berlin finalizes TUI deal: Germany's second-largest carrier gains two new shareholders and the scheduled carrier business of TUIfly. - Paul Whitfield

March 24: Red ink dots European, Asian skies: Airline industry losses of $4.7 billion in 2009 may speed up dealmaking. - Lou Whiteman

Oct. 29: The Department of Justice gave antitrust clearance to Delta's $3.1 billion merger with Northwest Airlines Corp. after a six-month review of competitive concerns, a relatively fast pace for such a complex transaction. The airlines later announced that they had closed the transaction. - Cecile Kohrs Lindell

Shareholders approved the deal Sept. 25. Integration, then, got underway, including downsizing and possible changes to its post-merger order book.

LUFTHANSA, AUSTRIAN AIRLINES

Feb. 11: EC investigates Lufthansa deal: The Commission is questioning terms of Austrian Airlines' privatization. - Andrew Bulkeley In November, Germany's Lufthansa was the sole remaining bidder for a 41.6% stake in Austrian Airlines AG after the Austrian privatization agency said the only rival offer didn't live up to the auction's regulations. - Andrew Bulkeley

Feb. 10: AirTran increases pressure on one-time target Midwest Air; Feb. 9: Delta trims domestic airport rent post-merger; and Jan. 30: Continental sets date to switch airline alliances

AIR FRANCE-KLM-ALITALIA

Jan. 12: Bankrupt Italian airline Alitalia-Linee Aeree Italiane SpA brought on Air France-KLM as a minority shareholder. The investor agreed to pay €323 million ($433 million) for new shares representing 25% of the restructured Alitalia, ending speculation that Deutsche Lufthansa AG could edge out its Franco-Dutch rival in the eleventh hour. - Andrew Bulkeley

And back on Nov. 18: Europe's largest airline, Air France-KLM, and Italian domestic carrier Air One SpA secured deals to join Italian investors to relaunch bankrupt Italian carrier Alitalia-Linee Aeree Italiane SpA, a source said. The Italian bidders spelled out their offer earlier in the month. Air France plans to take a 20% stake for about €200 million ($252 million) in Alitalia, beating out rival Deutsche Lufthansa to team with the Italian carrier. - Paul Whitfield

AER LINGUS-RYANAIR

In December, in a maneuver to exploit the potential of an airline industry downturn, Ireland's Ryanair Holdings plc renewed its quest for ailing domestic rival Aer Lingus Group plc, which the target firmly rejected. The all-cash offer of €1.40 per share for the 70.12% stake that Ryanair does not yet own comes a year and a half after European Commission competition regulators rejected Ryanair's €1.48 billion ($1.87 billion) hostile bid for Aer Lingus. It also comes two years after shareholders shunned that same offer. - Renee Cordes

Aer Lingus didn't immediately responding to the €200 million ($254 million) sweetener Ryanair added to its €748 million bid for the company Dec. 5. Instead, it announced the outcome of a ballot of its own, unionized, workers, which came out in favor of efficiencies and reformed working practices. The former state airline believes the costs cuts will save €25 million a year. - Jonathan Braude

Later, Jan. 28: Ryanair officials give up: The Irish government's refuses to sell its 25% stake. Days after, Jan. 23: Ryanair retreats from Aer Lingus: The carrier ended its $970 million pursuit after the Irish government ruled against the merger. - Barbara Rudolph Earlier, Jan. 21: Ryanair may retreat; and Jan. 16: Ryanair weighs higher bid.

SOLO FLIGHTS, STALLED TALKS AND SPECULATION

Elsewhere, will BA fly solo?: If the markets don't want to play along, British Airways plc captain Willie Walsh would just rather take his airline and go home. - Andrew Bulkeley

Meanwhile, could Southwest Airlines Co. be targeting Atlanta or AirTran Holdings Inc.? The Deal's Lou Whiteman raised the question Dec. 18. Meanwhile, British Airways and Qantas Airways Ltd. have called off merger talks. Earlier in December, BA said it was weighing a deal with Qantas "via a dual-listed company structure."

UAL Corp. and US Airways Group Inc. have secured fresh financing to boost liquidity and Southwest Airlines reported its first quarterly loss in 17 years. But could things start to look up for the airlines? Maybe so.

The news came a month after Continental pulled itself out of the consolidation game, saying in a statement April 27 its board supported management's recommendation that "in the current industry environment" it was not the right time to merge with another airline. Continental at the time pointed to alternatives related to alliances. The same day, UAL issued a two-sentence statement from its chairman, president and CEO Glenn Tilton regarding consolidation, saying it would "pursue all options to ensure a strong, sustainable future." UAL and Continental had reportedly been in formal merger talks and though Continental had taken itself out of the running, UAL was still in talks with US Airways on a potential merger, the Wall Street Journal reported April 28.

Meanwhile, Delta on April 14 agreed to acquire Northwest for more than $3 billion, at long last. (The next day, UAL issued a statement from Tilton saying: "We will participate in consolidation when and if it is the right choice.")

Delta and Northwest had been circling each for months and trying to win labor approval for a deal. Reports indicated April 11 that pilots had reached a tentative deal that would allow for a merger, after months of impasse. The pair resumed talks April 7, weeks after pilots rejected arbitration March 19, stuck at an impasse. A Delta-Northwest deal looked close or a reality Feb. 19, when pilots jumped on board for a tie-up ahead of a scheduled meeting Feb. 20, but the picture was cloudier just a week later. Regardless, the year got off to a busy start for airline merger buzz. A rundown:

• Delta lobbied its board for approval Jan. 11 to enter formal merger talks with both Northwest and UAL. The request followed months of rumors about potential deals, and comes as surging oil prices have driven most airline shares to 52-week lows," Whiteman noted, also pointing out that many observers aren't convinced consolidation can solve the industry's trying structural problems.
• The news came weeks after Delta reportedly suspended plans to sell its Comair regional business as buyers were few and talk of a larger deal for Delta heated up.
• Indeed, in mid-January, Delta's two prospective merger partners looked likely to bring both opportunities and challenges to any deal, Whiteman noted, including United's domestic network, which is broader than Northwest's. But a deal combining the country's No. 2 and No. 3 carriers would surely draw labor and antitrust scrutiny. He also pointed out that:  

A deal with Northwest could be further complicated by a hostile counteroffer, with Continental Airlines Inc. and AMR Corp.'s American Airlines Inc. both viewed as potentially interested in acquiring Northwest. In the worst case scenario, Delta could be left at the altar without a partner should Northwest agree to a counteroffer and United, after initially being spurned by Delta, struck its own deal with another airline. A hostile counteroffer for United is considered less likely given that airline's larger size and complexity.

• In mid-February, Delta and Northwest agreed to their deal framework. But, ahead of unveiling any merger agreement publicly, the companies:

went to labor groups prior to announcing the transaction in hopes of easing what has historically been one of the most difficult aspects of integrating airline deals. Some details must still be ironed out, however, such as the size of an equity investment the pair are to receive from international alliance partner Air France-KLM Group. There is also some discussion, according to sources, of offering Northwest shareholders a small premium over what was originally intended as an at-market stock swap deal in hopes of discouraging rival bids for the airline. ... The companies had hoped an investment of between $750 million and $1 billion by Air France would scare away rival bidders for Northwest, which is a coveted merger partner for its access to restricted Asian markets.

EVERYBODY ELSE

Another notable element of a Northwest merger is the freeing up of the "golden share" agreement it has with Continental that affords it the right to block any potential deal Continental may go after. Having announced plans to deal with Delta, Northwest forfeits the golden share. And according to a Reuters report April 14, Continental and United were ready if others announced deals.

Whiteman noted months earlier:

According to sources, UAL Corp. has rekindled on-again, off-again talks with Continental in recent weeks as the odds of a deal with Delta become more remote. ... Houston-based Continental, which despite being smaller than United, Delta and industry leader American Airlines Inc., is considered healthier than most, thanks to its strong South American route network and booming trans-Atlantic hub at Newark Liberty International Airport."

From an alliance prospective, Northwest is already a SkyTeam alliance partner, while United is a member of the rival Star Alliance. Should Continental decide against a deal with UAL, it was thought the carrier could consider a SkyTeam agreement, something it acknowledged in its April 28 statement. "An alliance shift, coupled with a strong codeshare agreement to coordinate schedules with UAL and sell tickets on each other's planes, would give Continental many of the benefits of the merger without exposing it to the risks of a deal," Whiteman noted.

Among other carriers, UAL's shaky labor situation could make it a less-desirable merger partner, while American Airlines could go hostile to break up a Delta-Northwest deal, but it could also seek out opportunities related to such a deal, he suggested, like "an antitrust challenge where American demands additional access to coveted Pacific Rim destinations including China to be more likely."

M&A VANTAGE POINT

In a year-end piece on the current shape of the airline industry from a U.S. perspective, Whiteman predicted that airline merger advocates could soon have it their way. "Sustainable profitability remains an elusive goal for the airline industry, leaving management teams finally ready to consider all options." He pointed to several factors:

• the high price of oil exacerbating structural problems
• greater shareholder pressure
• management teams having no other options
• federal regulators appearing more supportive
• uncertainty about the 2008 election may spark dealmaking under the current administration

Delta, he argued, seemed likely to get things started.

With both international opportunities and cost-reduction imperatives in mind, most expect Delta to eventually make a run either at Northwest or United, with Northwest, given its smaller size and existing partnership with Delta in the international SkyTeam alliance, perhaps the more palatable choice.

Meanwhile, back overseas, Lufthansa said Dec. 13 it would pay $305 million for a 19% stake in U.S. discount carrier Jet Blue Inc. The news came a week after the German company retreated from bidding for Italian carrier Alitalia. A possible bid contest for the Italian carrier kicked off December airline M&A buzz in Europe. Ahead of Lufthansa's retreat, Air France-KLM unveiled plans Dec. 6 to go head to head for the company with Italian discount carrier Air One and other Italian investors. The board met to agree on a bidder Dec. 12, but then extended the bidding until Dec. 18, citing a new offer. The company said the next day that SA Holdings Ltd., Evergreen LLC and THL Transportation were interested. Rival bidders revealed their turnaround plans for the carrier Dec. 17. (Meanwhile, The Deal's Jonathan Braude examined Jan. 11 whether Air France-KLM's plans for Alitalia looked likely to pan out noting cutting Milan out of the equation could be costly.) Air France-KLM walked away from its €139 million ($217 million) bid for Alitalia following the collapse of negotiations with unions on disagreements over how much restructuring work the carrier needed. The Italian government then unveiled plans April 3, to try to revive talks between the would-be buyer and unions representing Alitalia's workers in a move to stave off a bankruptcy filing for the carrier.

Elsewhere, in early January, Singapore Airlines Ltd.'s hopes of expanding into China were dashed after "shareholders in China Eastern Airlines Corp. rejected its agreed bid for a 24% stake. Their decision clears the way for Air China's parent, China National Aviation Holding Co., to make a higher offer, though the rival suitor has yet to win over its target." Paul Whitfield wrote.

The Alitalia auction, was the latest attempt by the Italian government to sell off its 49.9% stake in the money-losing carrier. The government called off the auction July 18 after the last bidders standing at the time pulled out due to onerous restrictions. The government then said July 26 it would ease conditions to revive interest. U.S. private equity firm TPG, which has been trying to buy an overseas-based carrier for some time, was also in the running earlier in the year.

Elsewhere in Europe, a TPG-led consortium in late November withdrew its bid for Spain's largest carrier, Iberia, after bid partner British Airways said it wouldn't increase its stake in the airline, clearing the way for Spanish bank Caja Madrid to buy up shares held by two other Spanish lenders. TPG then said Nov. 28 it would be open to bidding for Iberia again. BA has since been in talks with Caja Madrid over the airlinels future and in March raised its Iberia stake to 13.15% from 10.1%, the Journal said July 29.

HOLDING PATTERN

Stateside, airline M&A buzz abounded in November. AMR made headlines Nov. 27 when it said it would shed its regional carrier American Eagle to boost cash and trim costs. A day later, Whiteman summed up analysts' reaction. The news came two months after the company drew shareholder fire from FL Group hf, which made public Sept. 27 a letter urging the company to boost its stock price through the spinoff of American's frequent-flyer rewards program, AAdvantage.

AMR's stock fell from more than $40 per share in January to below $25 per share, where it hovered in November -- a precipitous drop that has cost investors $5 billion, Reykjavik-based FL Group said at the time. Further, the 9.1% AMR shareholder said, a spinoff could boost shareholder value by more than $4 billion. Unsatisfied, FL Group on Nov. 20 cut its stake in the airline's parent to 1.1%, saying the American Eagle move was a step in the right direction, but lacked clarity with respect to timing and valuation.

Meanwhile reports of talks between Delta and UAL created a flurry Nov. 14. The news came three months after Delta installed former Northwest CEO Richard Anderson as chief executive and nearly seven months after the Atlanta-based carrier, having successfully staved off hostile bidder US Airways Group Inc., emerged from bankruptcy as a standalone company.

Delta's pilots came out a week later saying they have no interest in seeing a Delta-UAL tie-up, while those familiar with Delta's thinking, Whiteman said, would prefer a deal with Northwest, likely posing less union opposition and regulatory hurdles. The company unveiled plans Aug. 21 to install Anderson as its chief executive, which again stirred up merger rumors that circled the carriers after filing for bankruptcy protection more than two years ago, and again, earlier this year when Delta was the target of a hostile bid from US Airways. 

Anderson denied negotiations with United in a statement Nov. 14 but had in October spoken openly about the possibility of dealmaking if the circumstances were right. But as Whiteman pointed out, it looked like the run up to long-awaited consolidation:

That denial aside, Delta has of late talked up the idea of industry consolidation, highlighting its intention to participate in the process. [A] source, who asked not to be identified, said that many of the nation's legacy airlines are informally kicking around merger scenarios.

(Weeks earlier, Delta unveiled a joint venture with Air France-KLM, solidifying its ties to SkyTeam, which looked like it could make a deal with UAL, a Star Alliance member along with Deutsche Lufthansa AG, less likely, Whiteman wrote.)

In many cases, shareholder pressure has abounded. Kicking off the Delta-UAL buzz, Pardus Capital Management LP, a shareholder in both Delta and UAL, urged Delta in a letter to consider M&A and pointed to UAL. Delta said it was reviewing strategic options. The hedge fund planned Nov. 16 to take its argument to other investors.

Meanwhile, Midwest Air Group Inc. accepted a $450 million offer, or $17 per share, from Texas private equity firm TPG on Aug. 17, rejecting long-time hostile bidder AirTran, once again. Midwest spent months keeping AirTran at bay. The carrier finally put itself up for sale July 31, with its board forming a committee to explore strategic alternatives, likely hoping a white knight would swoop in to the rescue.

Investors waited Aug. 10 as AirTran's tender offer deadline was set to expire. AirTran's, $389 million, or $15.75 per share offer, lost out to TPG's $16 per share bid on Aug. 13, a deal Midwest's largest shareholder, Pequot Capital Management Inc., expressed concern over. The next day, AirTran sweetened its offer to $16.25 per share, and TPG replied Aug. 17 with a winning $17 per share proposal.

The showdown happened quickly compared with AirTran's long pursuit of its rival.

FACING OFF

• Midwest rejected AirTran's original $290 million offer in December 2006.
• AirTran then raised its offer to $345 million in January, about one month after the target said it wasn't interested in a deal.
• AirTran said April 2 it had sweetened its hostile bid for Midwest to $389 million -- 34% above the initial bid.
• Eleven days later, Midwest shot it down, again.
  • AirTran's goal was to create a national discount carrier through its purchase of Midwest, stronger than either on its own, but Midwest contended it could stand firmer on its own and saw some shareholders holding out for a better price.
  • AirTran accused the target's board of "all but ignoring investors."
• After winning support from two proxy services and one union's pension arm, AirTran said June 11 it would extend its $389 million tender offer for Midwest until Aug. 10.
• Shareholders elected AirTran's slate of three nominees to its board during Midwest's shareholder meeting June 14 and asked the would-be buyer to plead its case, which it did July 17. AirTran was able to secure approval of Midwest stakeholders collectively holding 59% of shares, but the takeover hit a standstill when Midwest's board refused to waive its poison pill provision. Midwest then said July 31 it would open talks with AirTran and other prospective suitors.

BID AND BID AGAIN

But it's hasn't been all smooth sailing, particularly for TPG, which hit a few rough patches abroad.

Macquarie Bank Ltd. and TPG's $9.2 billion buyout of Qantas -- which would have been the largest buyout ever in Australia and the world's biggest aviation transaction -- hit turbulence earlier this year, raising the possibility it could be grounded. Shareholder opposition, sparked by improving market conditions, pressured Macquarie and TPG to rethink their takeover. The pair reworked their bank financing and lowered the approval threshold to 70% from 90%. It was to no avail. After failing to gain sufficient shareholder approval and after days of confusion, the consortium, Airline Partners Australia, finally conceded May 8 that its bid had failed.

TPG was also in the running for Italy's Alitalia earlier in the year, but it retreated. TPG said Oct. 4 it wouldn't likely bid.

Meanwhile, the TPG-led consortium that had been vying for Iberia, which includes British Airways plc and Spain's Vista Capital SA, Inversiones Ibersuizas SA and Quercus Equity, made an indicative $4.6 billion proposal, but then threatened to yank it if the airline did not respond by the end of July. A report then indicated Aug. 26 the TPG group could cut an offer price. Air France-KLM, Europe's No. 1 airline, and Apax Partners Worldwide LLP have also considered an offer for Iberia. The carrier said Nov. 15 it was fielding an offer worth $5.5 billion from a consortium led by Spanish private equity group Gala Capital Partners Equity SCR SA, bettering a $5 billion bid from U.S. private equity firm TPG and British Airways plc. TPG said in response it planned to proceed with its offer, and then withdrew it Nov. 26. The carrier's future remains unclear as consolidation, kicked off by Air France SA's 2003 deal for KLM Royal Dutch Airlines NV and Lufthansa's 2005 deal for Swiss International Air Lines AG, will likely continue, the Financial Times noted.

The Fort Worth-based firm is set on a plan. As The Deal's Paul Whitfield has pointed out, TPG has scoured the globe for carriers under the assumption that increased global competition will drive consolidation, as the industry in Europe is on the verge of deregulation, and plans to use Iberia as a core from which to build.

In March, European Union transportation ministers unanimously backed an "open skies" pact that will bring more competition to trans-Atlantic air traffic and could spur airline consolidation. Though the pact wouldn't be implemented until the end of March 2008, a consolidation wave could soon kick off. On March 27, German carrier Air Berlin plc & Co. Luftverkehrs KG said it would pay $186.2 million in cash and absorb up to €200 million ($267.2 million) in debt to buy former SwissAir unit Lufttransport-Unternehmen GmbH, known as LTU, a deal that makes it Europe's No. 4 airline.

WHAT'S NEXT?

Delta soared out of bankruptcy April 30, 2007, ahead of schedule, and Northwest headed for the exit May 31. Delta flew solo after months of standing firm against a would-be acquirer in US Airways Group Inc.

• US Airways first presented its merger case to Delta in November 2006.
• Delta shot down the offer and said it planned to emerge as a standalone entity. Should the target have changed its mind, the deal would have been reminiscent of Tempe, Ariz.-based US Airways $1.5 billion merger last year with America West Group Holdings Corp., which formally ended its own stay in Chapter 11.
• Delta rebuffed US Air's $8.4 billion advance Dec. 19, calling it "inferior in value, structurally flawed and [saying it] cannot be executed as claimed."
• Also in December, Delta said its standalone reorganization plan, valued by Blackstone Group LP, implied a "consolidated equity value" for the company between $9.4 billion and $12.0 billion.
• In January, US Airways raised its offer for Delta to $10.2 billion.
• US Air withdrew its takeover proposal Jan. 31, but a general air of hostility among would-be merger partners remained.

CO-PILOTING

AMR was in February 2007 reported to be a target, which may have to beat back British Airways plc and Goldman, Sachs & Co. if it wants to keep flying solo. Citing sources familiar with the matter, BusinessWeek reported in February that the duo was among a group vying for control of the U.S.'s top airline and that the proposed bid was between $46 and $52 a share, or $9.8 billion to $11.1 billion. But any proposal could run into antitrust issues.

Then there was the factor of UAL, which said Aug. 24, 2007, it could sell off its maintenance business to shore up some cash, a deal which analysts estimated could yield $300 million to $600 million. In December 2006, speculation swirled around UAL and Continental. Rumors regarding UAL first took flight in September 2006 after a published report revealed it had hired Goldman Sachs to explore strategic alternatives.

During its nearly three years in bankruptcy, UAL cut 25% of its workers, trimmed more than $10 billion in debt and cut annual costs by more than $7 billion before resurfacing post-Chapter 11 in February 2006. (For more on airline bankruptcies, see a related Dealwatch.)