Delta shares up on AMR report

Airline said to be mulling bid for bankrupt American

FORT WORTH, Texas — Shares of Delta Air Lines Inc., the world’s second-biggest airline, rose Thursday after a report that it may try to buy American Airlines parent AMR Corp.

The Wall Street Journal said Delta, US Airways Group Inc. and buyout firm TPG Capital were separately looking at AMR, which is in the early stages of reorganizing through the bankruptcy process.

Delta, TPG, US Airways and AMR declined to comment.

Three big mergers since 2008 have helped the airline industry by reducing competition and making it easier to raise prices. In one of those deals, Delta bought Northwest. That deal made Delta the dominant airline at Memphis International Airport.

American missed out on the merger mania and fell from first to third among the world’s biggest airlines by passenger traffic. US Airways, which tried to buy Delta out of bankruptcy in 2006, has been widely viewed as a possible bidder for AMR.

Delta shares rose 26 cents, or 3 percent, to close at $8.87 after hitting $8.98 earlier in the day. The stock has traded between $6.41 and $12.81 in the past 52 weeks. US Airways shares gained 14 cents, or 2.4 percent, to $6.05.

Standard & Poor’s airline analyst Jim Corridore doubts that regulators would let Delta buy American. He said the combined airline would be too big even if it sold some assets. Delta was briefly the world’s biggest airline before United combined with Continental in 2010.

Corridore added that absorbing AMR “would be a big management distraction” for Delta. Hunter Keay, an analyst for Wolfe Trahan & Co., said regulators might accept a DeltaAmerican deal if Delta agreed to keep American’s pension plans.

The director of the Pension Benefit Guaranty Corporation, which insures the pensions of one in seven people in the U.S., urged American on Thursday to keep its retirement plans and not drop them on the government agency.

The PBGC is running a record

$26 billion deficit after more companies dumped their pensions during recession, and the agency could seek a taxpayer bailout.

Taking on American’s pension obligations would be a huge burden, but Delta might find it worthwhile to block an American-us Airways merger that would reduce Delta to third among U.S. airlines, Keay said.

American is saddled with large debts and troubled labor relations. Still, it would be appealing to other airlines because of its size, customer base, and strength in major U.S. and foreign markets, including Latin America.

It could be months before American’s fate is clear.

AMR management has the first chance to present a reorganization plan to creditors, after which rivals could present proposals to creditors and the bankruptcy judge in New York.