US Airways – Delta Merger Update


May 18, 2003
US Airways – Delta Merger Update: January 11, 2007

US Airways sweetens offer for Delta by 20%

Whether the sweetened bid from US Airways will be enough to win the support of two-thirds of Delta's creditors isn't clear. But airline bond analyst Roger King at CreditSights, a credit research firm, said he's betting that more than a third of Delta's creditors will support the new US Airways bid. That's enough, he noted, to block Delta management's plan to emerge from Chapter 11 as an independent airline.

"Their stand-alone plan is dead-on-arrival as a result of this new offer from US Airways," King says.

That doesn't mean US Airways' richer offer will win the support of the two-thirds of Delta creditors needed to win the bidding war, he added. A third bidder — possibly Northwest, United or perhaps even a group of hedge funds, banks and private equity investors — could enter the picture, he said.

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US Airways Raises Bid For Delta to $10.2 Billion - Congressional concerns about the merger prompted Parker to visit a dozen legislators on Capitol Hill this week

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US Airways Lifts Delta offer

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Delta's Future Just Got Trickier - US Airways' sweetened offer puts pressure on Delta to do a deal

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A sweetened deal and a deadline

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US Airways bid may aid Cincinnati, Takeover would increase local Delta traffic - Some US Airways flights connecting in Pittsburgh would be rerouted through Cincinnati

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Excerpt from today’s Wall Street Journal

Today the WSJ reported Gordon Bethune met with Delta executives late last week to review their standalone plan, and then with the Delta creditors committee at yesterday's meeting. People who have met with Mr. Bethune in recent days say he has indicted he thinks a Delta merger with US Airways makes sense and could win antitrust approval from U.S. regulators.

The sweetened (US Airways) offer was well received by Delta creditors, said one person familiar with the creditors' reaction. "It's a significant increase in value that changes the dynamic," this person said. Creditors now plan to pressure Delta to consider opening its books to US Airways as well as other potential bidders, this person said.

His presence already is having an impact on the Delta matter. At a three-hour meeting with US Airways executives in New York on Monday, the notoriously blunt consultant urged the airline to put forth its best offer for creditors to review, according to people who were in the meeting or briefed on it.

Yesterday US Airways raised its bid early in the morning ahead of a regularly scheduled Delta creditors meeting (that Mr. Bethune attended).

Mr. Parker said Mr. Bethune's arrival in the process is like a breath of fresh air. "Frankly, it was refreshing to present (the merger plan) to someone who really understands how this works. We had a nice dialogue," he said of the meeting with Mr. Bethune.

"I have been a proponent of stabilizing the industry by consolidating," Bethune said. "The barrier to consolidation has been as much testosterone as it is the government," referring to airline executives who can't decide which CEO and management teams will run the combined airline. "Somebody's got to leave. That's always a big impediment to consolidation," he said.


Business week -
Already, some of the new Democratic leaders in Congress are voicing their opposition and threatening to derail the US Airways bid for Delta. "This proposal is ill-conceived and designed primarily for the benefit of US Airways," says Rep. James L. Oberstar (D-Minn.), the new chairman of the House Transportation Committee. "I think we can slow it down and eventually stop it." While that must be music to the ears of Delta executives, they still need a Plan B of their own. Which means that as much as Delta might loathe coupling with US Airways, it's still likely there's a merger in its future anyway.
US Air's higher bid for Delta reflects a healthier industry

Delta's management issued a stand- alone plan that it said was superior to the offer from US Airways. A slow- moving series of meetings followed between creditors and representatives of Delta and US Airways, which served to pick apart competing proposals. And it appeared that the proposed big merger might dissolve.

That changed Monday morning, when the Delta creditors' new consultant, Gordon Bethune, who turned around Continental Airlines, met with the chief of US Airways, W. Douglas Parker. Through a series of tough questions about the merger proposal, Parker said, Bethune made clear that Parker should increase his bid to overcome creditors' doubts about the risks of the deal.

"He uses a lot of profanity; he asked a lot of questions," Parker said of Bethune. "It was clear they were still wrestling with our proposal. Was there enough reward to warrant the risk? He was very direct."

Roger King, an analyst at CreditSights, agreed, saying the Delta management plan was almost certainly dead on arrival. "The entrance of Gordon Bethune is a major positive for" US Airways, King said.

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US Airways CEO asserts SLC flight hub would remain; pilots not so sure

The president of US Airways on Wednesday asserted again that the Delta Air Lines hub at Salt Lake City International Airport would survive his company's proposed merger with Delta with no loss of service or jobs.

"Some of the people saying that perhaps don't really understand airline and hub economics," said Scott Kirby in a telephone interview with The Salt Lake Tribune shortly after US Airways raised its hostile bid for Delta to $10.2 billion. "What matters is if there is a large enough local market, and there is a large enough local market in Salt Lake to support more than one hub."

Kirby also said Delta's large reservation call center in Salt Lake would continue because it's wise to have reservation centers in several places.

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"This proposal is ill-conceived and designed primarily for the benefit of US Airways," says Rep. James L. Oberstar (D-Minn.)
Business week -
Boy, that Oberstar's a genius. Whose benefit should Parker be concerned with?

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