Delta Values Itself $12B After Reorganization

THE NEWS

According to Reuters and MarketWatch, Delta plans to submit its reorganization plan this week, which will have Delta be valued at $10-12 billion after reorganization. This is down from $12-14 billion estimated last week, but definetely more than US Airways is offering ($8 billion).

In November, US Airways announced that it wants to merge with Delta Air Lines for $8 billion. Delta management refused the offer, saying they want to get out of bankruptcy on their own. The offer was presented to Delta's creditors as well, who will hear out Delta's side of the story before making a decision. The deal then will have to be approved by the Justice Department. Some senators, like Johnny Isakson from Georgia, expressed their dissatisfaction with the merger.

THE OPINION

Delta never wanted this merger in the first place. As I mentioned before, I'm not in favor of this merger and it has a lot of obstacles in its way.

Shuttle Discovery Launched

THE NEWS

As the title suggests, the SS Discovery was launched on Saturday, Dec. 9 2006 at 8:47 p.m. The launch was relatively error-free. In an interview with Spaceflight Now, Tony Ceccacci, shuttle's flight director, said they don't "anticipate any large foam shedding or debris impacts." He also added that it's still important to check if there are any and match those with the data on Earth.

The mission, STS-116 is to supply the International Space Station (ISS) as well as attach a truss an rewire some solar panels, which will provide power until STS-117 can install additional solar panels, which will help the station to expand. STS-117, which will be carried by SS Atlantis, has a launch window between Feb. 22 and March 16. Source


THE OPINION

Let me be blunt: I don't like the shuttle. It's not because it's ancient technology (to me, it's not), but because of its size. The shuttle is about 2 million kilograms. In comparison, the Soyuz launch vehicle's mass, including Soyuz, is about 312,000 kilograms. If you launch Soyuz and Progress, you'd be launching about 14,590 kilograms. While the Space Shuttle can lift about twice more, one has to wonder about practicality about the space shuttle.

The Russians launched Zarya - one of the most critical modules of the ISS, which weighs about 19,000 kilograms - with a Proton rocket. Another Proton will deliver the Russian Multipurpose Laboratory Module in 2007 as well as two other systems. Even though Proton is a different rocket than the R-7 used to launch Soyuz and Progress, fact remains that it's still possible to deliver a payload using an unmanned rocket. Plus, NASA is developing its Aries series of rockets, which will act very similar to Russia's Soyuz-Progress program, which, compared to the Space Shuttle, is very successful.

Reusable vehicles are a great thing, but we are not ready for them just yet, mainly because we are using the same technology, enhancing it over and over. There are several replacements for that:

• A single-stage jet-rocket combination - the vehicle would take off using air-breathing propulsion and in space would use a rocket.
  
• A two-stage jet-rocket combination similar to White Knight and Spaceshipone. A jet carrier plane reaches a certain height and launches its rocket payload. Similar plan was developed by the Russians using its An-225 Mriya and Buran (Russian space shuttle) as well other combinations with European spacecraft.
• A space elevator. Oh, sure - it sounds like a crazy idea, but in a few decades, the technology will be ready. Some would say that the terrorists might attack the new tower. While this may happen, we shouldn't let our fears get the best of us. Progress must be made.

JetBlue Will Revive Old TWA Terminal

Picture from http://www.designbuild-network.com/projects/jetblue/

THE NEWS

JetBlue plans to revive the old TWA terminal (Terminal 5) at Kennedy airport for $875 million. The new terminal would handle up to 210 flights and will serve as an international gateway for the airline since the current JetBlue terminal, Terminal 6, doesn't have customs facilities. The terminal plan is a cooperation between Port Authority of New York and New Jersey (PANYNJ), who own airports in New York City's metropolitan area, JetBlue and preservationists.

The Port Authority wants to expand JFK, but Eero Saarinen's had a landmark status and thus couldn't be demolished. The new plan calls for JetBlue's terminal to be built behind the landmark so it wouldn't spoil the view. The new terminal, however, would not be as elaborate and stylish as TWA's terminal. In an interview with BusinessWeek, Richard Smyth said that the design will be very straightforward and there will be nothing sexy about it.


THE OPINION

The problem lies with connecting the structure to the rest of the airport. While AirTrain serves much of the JFK facilities, its Terminal 5/6 stop is much closer to Terminal 6 than 5. It will be a hell of a walk between the two terminals. Also, one has to wonder about its uses: will JetBlue stay in two terminals or just one? Is there enough capacity for JetBlue, American and Delta? All three have hubs at JFK, but only Delta's and JetBlue are growing at a more rapid rate than American, which is the dominant carrier at the airport.

Also, JetBlue has some financial troubles, which are not a major concern, but a concern nevertheless. A declining profit margin, curtailing growth - these may be the signs of a dying carrier. Or some would think so. Ever since its start in the Millennium, JetBlue has captured the hearts and minds of New Yorkers. It has turned into an even more official airline than Continental, partly because it's actually in New York City. As any other business, JetBlue has to grow, so the expanded terminal should serve JetBlue nicely.

Is the new Delta good?

I want my first entry to be about the Delta-US Airways merger. Or should I say US Airways-Delta, since US is the one taking over Delta.

According to Market Watch, US Airways has submitted a bid of $8.5 Billion to take over Delta Air Lines to its creditors (according to US Airways' site, however, their bid remains at $8 Billion). In exchange, "Delta creditors would receive $4.0 billion in cash and 78.5 million shares of US Airways stock with an aggregate value of approximately $4.0 billion based on the closing price of US Airways’ stock as of Nov. 14, 2006." US Airways has also said that the Delta brand will survive

Delta's CEO, Gerald Grinstein and the company's exectuve board has already reacted negatively to the merger, but US Airways' CEO, Doug Parker is persistent, approaching Delta's creditors. Delta is in bankruptcy (never a good sign) and US Airways' offer may be tempting to those who want to get paid sooner. Delta just reported an $88 Million loss for October, but a $52 Million profit for the last quarter.

But since Delta executives have refused the offer - twice, US Airways target is not to woo the airline itself, but the creditors, indicating a hostile takeover. While US Airways has expressed that the merger would be good for both of the companies and the creditors, Delta disagrees and wants to emerge from bankruptcy on its own.

This puts Delta in an interesting position. There may be a few outcomes:
- Delta creditors accept US Airways' bid, resulting in a 10% capacity reduction (but no cities will be eliminated, US press release says) and should save the new airline $1.65 Billion. Since both airlines have an east coast shuttle, Delta Shuttle and US Airways Shuttle, running hourly from Washington DC's Reagan, New York's LaGuardia and Boston's Logan airports, the new airline would sell one of the east coat shuttles. Airtran has already shown interest in that part. Anyone up for AirTran shuttle?
- Delta creditors could accept the bid, but the federal authorities could say no. This case is more probably, since the new carrier would have 20% market share in the US and a lot of cities in the east might see a 70% dominance in their market.
- And finally, Delta creditors could reject the bid, possibly resulting in shares for both airlines tumbling.

In any case, bigger is not always better. There are currently 6 "legacy" carriers, or the old-age airlines: American, Northwest, Delta, Continental, US Airways and ATA. The merger would reduce the carriers to 5. A merger between any of these possibly will happen, especially due to pressures from outside partners. For example, Air France-KLM expressed interest in some kind of Delta-Northwest merger. This may be important to Air France-KLM, since Northwest is a strategic partner of KLM and they might want to see a merger that's similar to Air France-KLM. Air France-KLM, Delta and Northwest are all part of the SkyTeam alliance, while US Airways is not.

According to Houston Chronicle, Continental's former CEO Gordon Bethune has expressed interest in having Continental acquiring United. He as well as Air France-KLM indicated that some kind of merger between legacy carriers has to happen.

Now, let's take a look how this may affect low-cost carriers. Airtran has already expressed interest in acquiring the east coast shuttle, while Southwest has expressed its interest in acquiring slots in some cities that the new airline would have to give up. JetBlue, has been relatively quiet, which is surprising, considering its enormous operations at Kennedy and Logan and may indicate that JetBlue may be left out of the assets deals. However, Neeleman did mention that the merger or any type of consolidation is good for JetBlue.

US Airways also did not consider one of the important assets of a merger: the loyalty of the employees. Under the new arrangement, US Airways will gain more than they will lose. The new company will have different unions, which may conflict with each other.

As one company, Delta and US Airways have too many overlapping routes. Their hubs are too close and some may have to shut down. A perfect example is US hub in Philadelphia and Delta's hub in JFK. Delta's international and especially the Atlantic network at JFK shuns US Airways's international network at Philadelphia International.

US Airways is just emerging from its merger with America West. In fact Doug Parker, was America West's CEO and initiated the merger. Now, a year later, the company wants to merge with another company. Question arises here - are they ready? I don't think so. They have yet to prove that they are profitable on a year-to-year basis, like Southwest and Continental have done.

All these factors may result either in a dysfunctional business or the two airlines may just go their own ways.

Welcome to my blog

Hi. The goal of this blog is to express my opinions and prediction on the aerospace industry. Please note that I am in no way a professional, but just a college student, who is very much interested in aviation and space. If you like my blog, thank you; if you don't, I'm sorry you feel that way. Either way, you can express yourself through commenting.

Thank you,

Alex