What’s the deal with Delta Air Lines, Inc (NYSE:DAL)?
A movement in one part of an industry can send ripples into all its arms no matter how far removed they are from the core. That’ exactly what happened in the case of Delta Air Lines, Inc (NYSE:DAL). The airlines shares plummeted 7.08% on Tuesday in the wake of the news that the U.S Justice Department is planning on blocking the LLC and American Airlines merger.
The argument being that a merger such as this one will mean that consumers will pay higher fares and fees and that it also hampers healthy competition in the market. Dating from 2008, three major mergers took place in the airline industry. These ended up pushing the fares higher, limited the number of seats and also helped the concerned airlines return to profitability. Investors had expected that the latest merger will also carry that trend forward.
The Justice Department’s announcement took Wall Street and the airline industry by surprise resultantly, shares of all airlines dipped on Tuesday. The two airlines will now have to tackle the Justice Department in the courtroom to try and negotiate a settlement that will permit the deal to sail through.
If this deal eventually gets the nod from authorities in the U.S, it will be the latest addition of mergers. It will also mean that Delta Air Lines, Inc (NYSE:DAL), Southwest, United and American will be the products of a slew of mergers that commenced in 2008 and over 80% of the domestic market would be controlled by them.
Of all the airlines, DAL provides services to the most destinations from New York. Earlier this year, delta opened up its Terminal 4 at the JFK airport. It is also investing over $160M in the expansion and enhancement of terminals D and C at the La Guardia airport. The one of its kind, Delta Shuttle product operates hourly services from Chicago, Boston and Washington D.C.