Delta To Buy Regional Carrier

Delta Air Lines said Tuesday it's agreed to acquire ASA Holdings Inc., the operator of Atlantic Southeast Airlines, for $700 million, or $34 a share, a move that would boost the airline's presence in the Southeast.

The purchase price represents a 6 percent premium over ASA's (ASAI) Friday closing price of 31 15/16. Shares of ASA gained 1 13/16 to 33 3/4 in trading Tuesday morning. Delta, which already owns 7.9 million of ASA's 28.5 million common shares, gained 15/16 to 53 1/2.

Delta has been building up its low-fare air service, primarily through its Delta Express unit established in 1996, in part to ward off upstart low-fare operator Southwest Airlines (LUV). SouthWest has been busy expanding into the Southeast and Northeast regions.

Delta (DAL), the third-largest U.S. airline, said the acquisition will enhance service for customers through closer integration of schedules and improved operations. The purchase will also add to Delta's earnings, starting in the first year of operations.

ASA's board has already approved the deal.

ASA, which operates Atlantic Southeast Airlines, already has a code-share agreement with Delta under which it flies customers to the bigger airline's hubs in Atlanta and Dallas/Fort Worth for travel to other destinations in the United States or overseas. More than 80 percent of its customers hook up with Delta flights.

After the purchase, ASA will operate as subsidiary of Delta. It will retain its separate workforce and pay structure. Delta said the deal will have "minimal impact" on ASA's workforce. ASA's current management will remain on board through the transition.

Atlantic Southeast Airlines, founded in 1979, serves 37 markets. It has a fleet of 88 aircraft with 2,673 employees based in 40 cities. It registered $410 million in revenue in 1998.

Written By Jeffry Bartash, CBS MarketWatch