Naming Anderson, Delta Spurs M&A Buzz

It didn't take long for merger speculation to kick in after Delta Air Lines named former Northwest Airlines CEO Richard Anderson to replace retiring CEO Gerald Grinstein on Sept. 1. Delta also appointed CFO Ed Bastian as president. Meanwhile, COO Jim Whitehurst, who along with Bastian was a candidate for the position, resigned.

"We believe that the naming of Mr. Anderson to the post and the elevation of the CFO, Ed Bastian, to president mean that Delta is seriously preparing for industry consolidation," Calyon Securities analyst Ray Neidl wrote following the appointment. Neidl, however, contended that major mergers likely are not imminent. "The question is not if Delta wants consolidation," Neidl said, "but will they be a buyer or a seller? We believe DAL is better suited as a seller. Delta's system would fit very well with network carriers such as NWA and United, particularly due to their strong Pacific operations."

Management Alternatives vice president John Heilner said, "While one commentator said this is not necessarily a precursor for a merger—'because they are both out of bankruptcy and have good cash positions now'—I'll go out on a limb and predict they will merge within 12 months."

Delta's new chief quickly quelled such speculation, however, and said he would spend his inaugural weeks as CEO working internally to bolster customer service, operational performance and financial strength. Grinstein in a statement said Anderson has "extensive background in the Far East and Asia, which are among Delta's next growth opportunities. Richard's sound judgment and professionalism make him a great addition to Delta's battle-tested leadership team." Delta in a Securities and Exchange Commission filing last month said Anderson's base salary would be $600,000, with the opportunity to net additional millions in incentives and bonuses.

Anderson joined UnitedHealth Group as executive vice president in 2004, following 14 years at Northwest, where he served as CEO from 2001 to 2004. Anderson also served as Continental Airlines staff vice president and deputy general counsel.

Grinstein last year voiced his intent to retire following the carrier's exit from bankruptcy court protection, completed in April, leading Delta's board to search for a replacement. Board member Anderson gained the position "after a thorough search," said Delta board of directors chairman Daniel Carp. "The board concluded that Richard Anderson possesses the right blend of seasoned leadership, strategic skills, international experience and airline knowledge the company needs to navigate the industry's challenges and capitalize on its opportunities."