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US Airways – Delta Merger Update – November 18, 2006
How US Airways got back on course – Aggressive leadership leveraged bankruptcy law to spark resurgence
US Airways must persuade Delta's unsecured creditors to pressure Delta management into selling And because the new airline would dominate some markets, the new Delta must convince federal regulators it wouldn't be anti-competitive
See Story
US Airways Needs Delta Creditors to Push for Merger
See Story
US Airways, antitrust officials discuss Delta bid
See Story
Delta Seeks Creditor Help to Fend off US Airways Bid
NEW YORK (WSJ) – Delta Air Lines began trying to rally support from the creditors for its push to fend off an $8.76 billion hostile takeover bid by US Airways, with the Atlanta carrier finally reiterating its determination to emerge from bankruptcy as a standalone company.
Delta Chief Executive Gerald Grinstein and other executives at the third largest U.S. airline by traffic held a series of conference calls yesterday with creditors to sift through terms of the US Airways offer, pressing creditors to back Delta’s restructuring plan. The move could give Delta an early advantage in its fight to remain independent, since US Airways hasn’t had any fact-to-face meetings with creditors.
US Airways said late yesterday afternoon that management had not yet met with Delta creditors but are eager to do so. “We’re looking forward to meeting with them. We want to sit with them and show them the value of this dealâ€, said US Airways spokeswoman Andrea Rader.
The Atlanta airline said the executives were reviewing the unsolicited proposal, which seeks to combine US Airways, based in Tempe, Ariz., with its much bigger rival under the Delta name and become the biggest US Airline in terms of passenger traffic.
“As we are obligated to, we will continue to work, including with our creditors, to examine the unsolicited proposal from US Airways,†said Marshall S. Huebner, of Davis Polk & Wardell, who has led Delta’s bankruptcy restructuring.
Meanwhile, Mr. Grinstein continued his defiant defense to employees and creditors of his plan to emerge from bankruptcy as a stand-alone carrier. Mr. Grinstein learned of the US Airways proposal from a radio report as he was getting ready for work. He rushed to his Blackberry to find an email text of a letter from US Airways CEO Doug Parker and a voicemail from Mr. Parker.
People familiar with the matter said Mr. Grinstein was steaming from being blindsided. In a message to employees he said “We had no advance warning of any kind.†He added his intent was that Delta remain an “Independent standalone company,†repeating words for effect, “not as a merged, acquired or otherwise consolidated airline.
One of the biggest hurdles for a successful US Airways-Delta merger will be resistance from US Airways’ labor union leaders, who voiced their opposition to a proposed deal yesterday. Management must still combine labor unions of the predecessor companies and negotiate new pay and benefit contracts, including for pilots who say little progress has been made toward achieving this.
“If this airline can’t successfully put two airlines together, we’re very skeptical about their chances of putting three together, said Jack Stephan, a pilot and chairman of the unit of the Air Line Pilots Association at US Airways, who in a conference call yesterday called management’s bid for Delta “insulting†to the union.
Kevin Kent, a pilot chairman of the union’s America West unit, said the pilots “recognize US Airways senior management’s enthusiasm for a merger with Delta; however, before it can be successful, management must first focus of fulfilling the promises made to their investors, customers, and employees for the America West-US Airways merger.â€
Even before the Delta bid surfaced, pilots at US Airways had planned to picket this week at airports in Phoenix and Charlotte. Yesterday nearly 600 hundred of them showed up to protest what they say are substandard contracts with little-to-no improvement in pay or benefits and unreasonable work rules.
Ms. Rader, the US Airways spokeswoman, said the pilots picketing is part of what tends to be typical in airline union-contract negotiations. She said the negotiations have had some progress, thought it has been on low-hanging issues so far. She disagreed with the union’s assertion that the current merger is not working well.
“For them to say the merger is not on track is not true. There are a lot of milestones that we are hitting and that we’re on track to meet and when we make mistakes we get them fixed,†she said.
As for the pilots’ objection to the Delta deal right now, Ms. Rader said the company management is simply seizing an opportunity when it must. “You’ve got to take the opportunity when it presents itself, not when it’s convenient for you. In a perfect world we would have preferred to get our integration behind us before we took on another one.â€
US Airways makes formal bid – Company files full merger presentation with the U.S. Securities and Exchange Commission titled, “Proposed US Airways/Delta Merger Will Not Reduce Competitionâ€
Delta creditors, the SEC, bankruptcy court and US Airways shareholders get the final say on the proposed acquisition, regardless of Grinstein’s opinion
See Story
Low-fare rivals seen key to US Airways antitrust concerns
WASHINGTON (USA Today) - Increasingly stiff competition from low-fare rivals could be the key factor for US Airways if it ultimately wins approval from antitrust regulators to merge with Delta. "US Airways is likely to argue that low-fare competitors have injected new competition into the industry in hopes of soothing concerns at the Justice Department's antitrust division," Reuters writes, citing industry and antitrust experts. "There's a feeling in the industry that the way mergers are looked at today might be different than the way they were looked at a few years ago," one unnamed industry source tells the news agency. "The (antitrust) analysis ought to change," adds the source, who spoke on the condition of anonymity. Rep. James Oberstar, a Minnesota Democrat and the incoming chairman of the House Transportation Committee, says federal hearings would be likely if the merger moved ahead. The Congressman says he has already asked his staff to begin evaluating routes and other operations of both Delta and US Airways.
However, Reuters says that "low-fare competition such as JetBlue Airways and AirTran, along with upheaval that has led to billions of dollars in losses in recent years, could help convince antitrust regulators to approve the deal without imposing too many conditions, such as shedding large numbers of routes and giving up airport gates." At the least, however, most agree that a "new" Delta would have to unload one of the shuttle services currently operated by each Delta and US Airways. Still, industry observers say that even with regulators at least be open to the idea, they believe merger proponents will have their work cut out for them. "This is a transaction that the Department of Justice is going to examine very closely," says Washington antitrust lawyer Mark Schechter,of the firm Howrey LLP. "The parties are going to have a very challenging task ahead of them."
Are you ready for a Northwest shuttle in the Northeast?
WASHINGTON (USA Today) - Or how about the United or AirTran shuttle? Those options could become a reality if US Airways pulls off its proposed merger with Delta. That's because the merged carrier would likely need to sell off at least one of its shuttle operations (Delta and US Airways each currently operate their own New York-DC-Boston shuttle) if the deal is to pass regulators' muster. In addition to the shuttle routes, The Associated Press adds that "to address regulators' antitrust concerns -- and meet a strategic [merger] goal of trimming flying capacity by 10% -- the combined company would probably forfeit airport gates up and down the East Coast, in places such as Charlotte, Atlanta and across Florida." As for the shuttle, spinning off one of the two carriers' shuttle services would likely be easy, analysts predict. Already, they say, both US Airways and Delta operate their shuttles "as somewhat separate entities from the mainline operations."
"The only questions are assigned seats or not, Airbus or Boeing. It's all the same," says airline industry consultant Robert W. Mann. He predicts that if the merger goes though, frequent fliers of either Delta or US Airways aren't likely to notice much of a difference. "At the end of the day, there may be a couple fewer frequencies and somebody else's brand," Mann says. American would be the most-likely suitor for any US Air/Delta shuttle gates that are freed up at Washington, Boston or New York, according to Daniel Kasper, an airline consultant at LECG in Cambridge, Mass. He says the next most likely bidders (in order) are Northwest and United. Left out of other industry observers' discussions (so far, anyway) is AirTran, which previously expressed interest in US Airways' gates at Washington National. Those gates came up for discussion during US Airways' two post-9/11 bankruptcies, when it was thought US Airways might lose them either through downsizing or liquidation.
Delta execs have tough job fending off US Airways
See Story
US Airways, Delta deal would cut options
See Story
US Air: Delta buy won't cut competition
See Story
Boeing could lose in US Airways, Delta deal
See Story
Why Doug Parker wants to fly Delta
See Story
Delta CFO Says Standalone Plan 'Far Superior' to US Airways' Bid
See Story
Let Delta fly right - The proposed merger between US Airways and Delta is a step in the right direction for the ailing industry
See Story
Massport chief vows to monitor Delta deal - Based on 2005 figures, a combined US-Delta would control nearly 34 percent of Logan's market, compared to 20 percent for current top carrier American Airlines
See Story
About US (US Airways’ Weekly Newsletter) Special Merger Edition) – November 17, 2006
See Story
Regards,
USA320Pilot
How US Airways got back on course – Aggressive leadership leveraged bankruptcy law to spark resurgence
US Airways must persuade Delta's unsecured creditors to pressure Delta management into selling And because the new airline would dominate some markets, the new Delta must convince federal regulators it wouldn't be anti-competitive
See Story
US Airways Needs Delta Creditors to Push for Merger
See Story
US Airways, antitrust officials discuss Delta bid
See Story
Delta Seeks Creditor Help to Fend off US Airways Bid
NEW YORK (WSJ) – Delta Air Lines began trying to rally support from the creditors for its push to fend off an $8.76 billion hostile takeover bid by US Airways, with the Atlanta carrier finally reiterating its determination to emerge from bankruptcy as a standalone company.
Delta Chief Executive Gerald Grinstein and other executives at the third largest U.S. airline by traffic held a series of conference calls yesterday with creditors to sift through terms of the US Airways offer, pressing creditors to back Delta’s restructuring plan. The move could give Delta an early advantage in its fight to remain independent, since US Airways hasn’t had any fact-to-face meetings with creditors.
US Airways said late yesterday afternoon that management had not yet met with Delta creditors but are eager to do so. “We’re looking forward to meeting with them. We want to sit with them and show them the value of this dealâ€, said US Airways spokeswoman Andrea Rader.
The Atlanta airline said the executives were reviewing the unsolicited proposal, which seeks to combine US Airways, based in Tempe, Ariz., with its much bigger rival under the Delta name and become the biggest US Airline in terms of passenger traffic.
“As we are obligated to, we will continue to work, including with our creditors, to examine the unsolicited proposal from US Airways,†said Marshall S. Huebner, of Davis Polk & Wardell, who has led Delta’s bankruptcy restructuring.
Meanwhile, Mr. Grinstein continued his defiant defense to employees and creditors of his plan to emerge from bankruptcy as a stand-alone carrier. Mr. Grinstein learned of the US Airways proposal from a radio report as he was getting ready for work. He rushed to his Blackberry to find an email text of a letter from US Airways CEO Doug Parker and a voicemail from Mr. Parker.
People familiar with the matter said Mr. Grinstein was steaming from being blindsided. In a message to employees he said “We had no advance warning of any kind.†He added his intent was that Delta remain an “Independent standalone company,†repeating words for effect, “not as a merged, acquired or otherwise consolidated airline.
One of the biggest hurdles for a successful US Airways-Delta merger will be resistance from US Airways’ labor union leaders, who voiced their opposition to a proposed deal yesterday. Management must still combine labor unions of the predecessor companies and negotiate new pay and benefit contracts, including for pilots who say little progress has been made toward achieving this.
“If this airline can’t successfully put two airlines together, we’re very skeptical about their chances of putting three together, said Jack Stephan, a pilot and chairman of the unit of the Air Line Pilots Association at US Airways, who in a conference call yesterday called management’s bid for Delta “insulting†to the union.
Kevin Kent, a pilot chairman of the union’s America West unit, said the pilots “recognize US Airways senior management’s enthusiasm for a merger with Delta; however, before it can be successful, management must first focus of fulfilling the promises made to their investors, customers, and employees for the America West-US Airways merger.â€
Even before the Delta bid surfaced, pilots at US Airways had planned to picket this week at airports in Phoenix and Charlotte. Yesterday nearly 600 hundred of them showed up to protest what they say are substandard contracts with little-to-no improvement in pay or benefits and unreasonable work rules.
Ms. Rader, the US Airways spokeswoman, said the pilots picketing is part of what tends to be typical in airline union-contract negotiations. She said the negotiations have had some progress, thought it has been on low-hanging issues so far. She disagreed with the union’s assertion that the current merger is not working well.
“For them to say the merger is not on track is not true. There are a lot of milestones that we are hitting and that we’re on track to meet and when we make mistakes we get them fixed,†she said.
As for the pilots’ objection to the Delta deal right now, Ms. Rader said the company management is simply seizing an opportunity when it must. “You’ve got to take the opportunity when it presents itself, not when it’s convenient for you. In a perfect world we would have preferred to get our integration behind us before we took on another one.â€
US Airways makes formal bid – Company files full merger presentation with the U.S. Securities and Exchange Commission titled, “Proposed US Airways/Delta Merger Will Not Reduce Competitionâ€
Delta creditors, the SEC, bankruptcy court and US Airways shareholders get the final say on the proposed acquisition, regardless of Grinstein’s opinion
See Story
Low-fare rivals seen key to US Airways antitrust concerns
WASHINGTON (USA Today) - Increasingly stiff competition from low-fare rivals could be the key factor for US Airways if it ultimately wins approval from antitrust regulators to merge with Delta. "US Airways is likely to argue that low-fare competitors have injected new competition into the industry in hopes of soothing concerns at the Justice Department's antitrust division," Reuters writes, citing industry and antitrust experts. "There's a feeling in the industry that the way mergers are looked at today might be different than the way they were looked at a few years ago," one unnamed industry source tells the news agency. "The (antitrust) analysis ought to change," adds the source, who spoke on the condition of anonymity. Rep. James Oberstar, a Minnesota Democrat and the incoming chairman of the House Transportation Committee, says federal hearings would be likely if the merger moved ahead. The Congressman says he has already asked his staff to begin evaluating routes and other operations of both Delta and US Airways.
However, Reuters says that "low-fare competition such as JetBlue Airways and AirTran, along with upheaval that has led to billions of dollars in losses in recent years, could help convince antitrust regulators to approve the deal without imposing too many conditions, such as shedding large numbers of routes and giving up airport gates." At the least, however, most agree that a "new" Delta would have to unload one of the shuttle services currently operated by each Delta and US Airways. Still, industry observers say that even with regulators at least be open to the idea, they believe merger proponents will have their work cut out for them. "This is a transaction that the Department of Justice is going to examine very closely," says Washington antitrust lawyer Mark Schechter,of the firm Howrey LLP. "The parties are going to have a very challenging task ahead of them."
Are you ready for a Northwest shuttle in the Northeast?
WASHINGTON (USA Today) - Or how about the United or AirTran shuttle? Those options could become a reality if US Airways pulls off its proposed merger with Delta. That's because the merged carrier would likely need to sell off at least one of its shuttle operations (Delta and US Airways each currently operate their own New York-DC-Boston shuttle) if the deal is to pass regulators' muster. In addition to the shuttle routes, The Associated Press adds that "to address regulators' antitrust concerns -- and meet a strategic [merger] goal of trimming flying capacity by 10% -- the combined company would probably forfeit airport gates up and down the East Coast, in places such as Charlotte, Atlanta and across Florida." As for the shuttle, spinning off one of the two carriers' shuttle services would likely be easy, analysts predict. Already, they say, both US Airways and Delta operate their shuttles "as somewhat separate entities from the mainline operations."
"The only questions are assigned seats or not, Airbus or Boeing. It's all the same," says airline industry consultant Robert W. Mann. He predicts that if the merger goes though, frequent fliers of either Delta or US Airways aren't likely to notice much of a difference. "At the end of the day, there may be a couple fewer frequencies and somebody else's brand," Mann says. American would be the most-likely suitor for any US Air/Delta shuttle gates that are freed up at Washington, Boston or New York, according to Daniel Kasper, an airline consultant at LECG in Cambridge, Mass. He says the next most likely bidders (in order) are Northwest and United. Left out of other industry observers' discussions (so far, anyway) is AirTran, which previously expressed interest in US Airways' gates at Washington National. Those gates came up for discussion during US Airways' two post-9/11 bankruptcies, when it was thought US Airways might lose them either through downsizing or liquidation.
Delta execs have tough job fending off US Airways
See Story
US Airways, Delta deal would cut options
See Story
US Air: Delta buy won't cut competition
See Story
Boeing could lose in US Airways, Delta deal
See Story
Why Doug Parker wants to fly Delta
See Story
Delta CFO Says Standalone Plan 'Far Superior' to US Airways' Bid
See Story
Let Delta fly right - The proposed merger between US Airways and Delta is a step in the right direction for the ailing industry
See Story
Massport chief vows to monitor Delta deal - Based on 2005 figures, a combined US-Delta would control nearly 34 percent of Logan's market, compared to 20 percent for current top carrier American Airlines
See Story
About US (US Airways’ Weekly Newsletter) Special Merger Edition) – November 17, 2006
See Story
Regards,
USA320Pilot
