"Cordle of Airline Forecasts Says Delta Bid 'Good Deal'"
Bloomberg TV - January 10, 2007
Interview with Vaughn Cordle, Airline Forecasts LLC
Newscaster: Joining us on the phone to discuss the new bid is Vaughn Cordle, he is the CEO of the consulting firm Airline Forecasts, also pilot for a major airline. Vaughn, good morning, good to talk to you again!
Cordle: Good morning Carol.
Newscaster: So what do you make of US Airways new and higher offer for Delta?
Cordle: I think young Doug Parker is going for it, he’s not messing around, he has upped the bid price by about $1.7 billion, which would value the company at $10.2 billion which is, in our view, at least $2 billion more than what Delta management can offer.
Newscaster: Ok Vaughn, as you well know, Delta’s board rejected the earlier offer from US Airways, saying it was better off as an independent airline. Will this higher offer even change their mind or will they wait for even another offer from US Airways?
Cordle: I think this bid should be viewed as a bear hug; it is no longer a hostile bid in my view, the creditors will be hard pressed to not accept this deal. It is in fact accretive to US Air in terms of the earnings post merger. It’s the revenue synergies that count, which US Air is estimating about $935 million, and those values, that value is worth whatever the cost the capital is or the reciprocal cost the capital, which is the PE, which will go down once the companies merge. So this is good news, I think, for the industry, I think its good news for Delta’s creditors and I think its good news for US Airs shareholders, I think its great news for labor of both parties. I believe in the end it will benefit the consumers.
Newscaster: Wait, it sounds like you think it’s a done deal.
Cordle: I don’t know if it’s a done deal or not, because DOJ, Justice Department, will have to weigh in on it, there will be some carve-outs, and they will have to eliminate one of the two shuttles they have on the East coast. But even with a reduction in capacity, which is estimated about 10 percent, which probably will be more than that, after it’s all said and done, you still have significant revenue synergies and some cost synergies and the net of this deal is it’s a good deal.
Newscaster: Alright, but do you think, it sounds like you think it will ultimately be a deal that does get done?
Cordle: I think it’s fifty-fifty, its hard to speculate on what the Justice department will do, the DOJ has to weigh in on this issue.
Newscaster: So what’s the biggest sticking issue at this point, anti trust concerns?
Cordle: Anti-trust concerns and congressional hearings that will be held, Democrats apparently, based on some comments coming from some of the chairmen of the committees, are opposed to mergers and consolidation in general.
Newscaster: Alright, they are supposed to look at this later this month actually.
Cordle: Right, so, the public sentiment, generally speaking, people think bigger airlines are bad news for consumers, but I think in this case the revenue and cost synergies are so great that the consumer can benefit in part from the synergies and it will result in a more stable airline and ultimately better service.
Newscaster: So Vaughn, do you think it’s just a matter of time that we hear from Delta saying let’s do this deal and then let’s see what DOJ says?
Cordle: Well, Delta, the management has exclusive rights until February, some date, I can’t remember off the top of my head, of offering a reorganization plan, but the unsecured creditors and the creditors committee, in my view, will be hard-pressed to turn down this deal.
Newscaster: Alright, do the creditors have a lot of voting power here, if you will, and just quickly?
Cordle: Yes I think they do, they have Coca-Cola, they’ve got Boeing, you’ve got Pilots, Alpa on the board, you’ve got a lot of folks. The final analysis, who can create the most value, and I think it’s the merged entity, Delta’s management’s argument has always been a bird in the hand is worth two in the bush, the risk of DOJ turning it down up to a year.
Newscaster: Vaughn, yeah, we’ve got to leave it there, we appreciate your time this morning, Vaughn Cordle of Airline Forecasts.
Regards,
USA320Pilot
Bloomberg TV - January 10, 2007
Interview with Vaughn Cordle, Airline Forecasts LLC
Newscaster: Joining us on the phone to discuss the new bid is Vaughn Cordle, he is the CEO of the consulting firm Airline Forecasts, also pilot for a major airline. Vaughn, good morning, good to talk to you again!
Cordle: Good morning Carol.
Newscaster: So what do you make of US Airways new and higher offer for Delta?
Cordle: I think young Doug Parker is going for it, he’s not messing around, he has upped the bid price by about $1.7 billion, which would value the company at $10.2 billion which is, in our view, at least $2 billion more than what Delta management can offer.
Newscaster: Ok Vaughn, as you well know, Delta’s board rejected the earlier offer from US Airways, saying it was better off as an independent airline. Will this higher offer even change their mind or will they wait for even another offer from US Airways?
Cordle: I think this bid should be viewed as a bear hug; it is no longer a hostile bid in my view, the creditors will be hard pressed to not accept this deal. It is in fact accretive to US Air in terms of the earnings post merger. It’s the revenue synergies that count, which US Air is estimating about $935 million, and those values, that value is worth whatever the cost the capital is or the reciprocal cost the capital, which is the PE, which will go down once the companies merge. So this is good news, I think, for the industry, I think its good news for Delta’s creditors and I think its good news for US Airs shareholders, I think its great news for labor of both parties. I believe in the end it will benefit the consumers.
Newscaster: Wait, it sounds like you think it’s a done deal.
Cordle: I don’t know if it’s a done deal or not, because DOJ, Justice Department, will have to weigh in on it, there will be some carve-outs, and they will have to eliminate one of the two shuttles they have on the East coast. But even with a reduction in capacity, which is estimated about 10 percent, which probably will be more than that, after it’s all said and done, you still have significant revenue synergies and some cost synergies and the net of this deal is it’s a good deal.
Newscaster: Alright, but do you think, it sounds like you think it will ultimately be a deal that does get done?
Cordle: I think it’s fifty-fifty, its hard to speculate on what the Justice department will do, the DOJ has to weigh in on this issue.
Newscaster: So what’s the biggest sticking issue at this point, anti trust concerns?
Cordle: Anti-trust concerns and congressional hearings that will be held, Democrats apparently, based on some comments coming from some of the chairmen of the committees, are opposed to mergers and consolidation in general.
Newscaster: Alright, they are supposed to look at this later this month actually.
Cordle: Right, so, the public sentiment, generally speaking, people think bigger airlines are bad news for consumers, but I think in this case the revenue and cost synergies are so great that the consumer can benefit in part from the synergies and it will result in a more stable airline and ultimately better service.
Newscaster: So Vaughn, do you think it’s just a matter of time that we hear from Delta saying let’s do this deal and then let’s see what DOJ says?
Cordle: Well, Delta, the management has exclusive rights until February, some date, I can’t remember off the top of my head, of offering a reorganization plan, but the unsecured creditors and the creditors committee, in my view, will be hard-pressed to turn down this deal.
Newscaster: Alright, do the creditors have a lot of voting power here, if you will, and just quickly?
Cordle: Yes I think they do, they have Coca-Cola, they’ve got Boeing, you’ve got Pilots, Alpa on the board, you’ve got a lot of folks. The final analysis, who can create the most value, and I think it’s the merged entity, Delta’s management’s argument has always been a bird in the hand is worth two in the bush, the risk of DOJ turning it down up to a year.
Newscaster: Vaughn, yeah, we’ve got to leave it there, we appreciate your time this morning, Vaughn Cordle of Airline Forecasts.
Regards,
USA320Pilot
