Five Big Bears Ready To Roar

Merger In The Skies
Northwest and Delta’s gains a few weeks ago, came from hopes that their merger deal could finally get up in the "air." This deal had been "grounded" since the beginning of 2008 because pilots from both airlines had not been able to compromise on seniority; something that decides the size of their paycheck!

By merging, these two companies are taking a step towards surviving, if not profiting, in a sector that is troubled in many ways. The aim is to become more equipped to combat rising fuel prices by parking older and more expensive aircraft and shutting down hubs that are poor-performers. (Check out our related article The Merger - What To Do When Companies Converge to learn more about how to take advantage of investing before, during and after a merger.)

An agreement was made, solidifying the details of the merger on April 14, 2008, and was detailed in their quarterly report released last Friday. Northwest shares will be exchanged for 1.25 shares of Delta for each share of Northwest. Also disclosed in this report was Northwest's net loss of $6.4 billion for the quarter, including a $6.1 billion charge due to loss of customer goodwill.

Although Northwest has taken some big hits in this last week, with the merger finally going through, profits might begin to pick up. In recent stock picks in the Stock Picking Community, you can see members such as merwyndsilva, and JStojak are waiting for the merger to send these prices back up. I agree with these members, and am hoping that consolidation in the industry will be the answer to the high fuel price woes.

Add Your Two Cents
What do you think will happen with the airlines going forward? Will consolidation in the industry create a synergy that will help profit margins bounce back? Be sure to join me (aytonmm) in the FREE Stock Picking Community to share your thoughts and see what other investors are saying.