USAirways to buy (merge) with Delta

[UnitedChicago]

United,

You pretty much make the key point. As DL's execs all said in trying to avoid bankruptcy (Mullin & Grinstein both), the reason to avoid was that you lose control. Parker gave Jerry the chance to negotiate, now Parker is playing hardball which seems to suggest this is no bluff. By going public and being willing to take this to the creditors, he's definitely put the ball firmly in Jerry's court to come up with a compelling reason to let him and the rest of the execs to stay in control of DL's destiny. I still believe we'll see some competing offers. What I would hate to see is a break up of DL as I think it's a good franchise that has been poorly run (and in some cases continues to be).

I think we'll get to see how serious Tilton is about consolidation. I think we'll also see how confident NW is in their plan to emerge sucessfully. Lastly, we may get some insight into What CO & AA plan to do long term.

and you bring up a good point as well about getting DL's management's attention by going straight to the creditors. It makes it likely that Grinstein will be forced to negotiate a deal now as opposed to letting the creditors dictate. I realize DL still has exclusivity but creditors vote on the plan. If they're being promised more money elsewhere - they'll vote elsewhere. If Grinstein doesn't deal, he'll need to line up more financing to compete with U's offer.

Looks likely to me Grinstein and U will meet somewhere in the middle.

 

[WorldTraveler]

A deal could be done in BK… that is not the issue. But there is a very high hurdle to be overcome – whether this deal could generate as good of a deal for DL’s creditors as they could get if DL remained independent. Further, there are no instances – NONE - of successful hostile takeovers in the airline industry.

The issue is that DL and US are substantial overlapping competitors across their entire system. You can’t just sell off a Shuttle and expect to make a merger between DL and US viable from an antitrust perspective. There are dozens of smaller cities – not hubs – that lose under a DL/US merger proposal. You cannot undo the anticompetitive affects of a DL/US merger w/o gutting what makes both airlines work. DL/US cannot and will not ever happen SOLELY on the basis of antitrust concerns. The fact that DL has said it will ask the government to block the merger on that basis makes it pretty clear that antitrust issues alone would stop this cold in its tracks.

DL and NW both know they could go into play while in BK. That is precisely why DL has said for months they had no intention of merging or being acquired by anyone. Despite all the hype, DL does have the exclusive right to formulate a plan of reorganization. While they now have to review the proposal and ensure their creditors support their position, this merger proposal is dead in the water. PERIOD. Even if other proposals arise, they still face a pretty high hurdle in ensuring as good of a return for DL’s creditors as they would get if DL were to emerge on its own.

You can bet all of the outstanding agreements DL has yet to sign will get signed very quickly. Airplane lessors, the PBGC, airports would all lose because a merger is based on shrinking capacity – all of which impacts every stakeholder. Do you honestly think HP pilots would support a merger w/ DL when they don’t even want to integrate seniority w/ US? HP pilots would be put ON THE STREET.

See the US presentation linked here:
http://yahoo.brand.edgar-online.com/EFX_dl...97K2EXV99W1_HTM

Carefully read the communication between Grinstein and Parker. See also that DL has said it has the backing of its creditors committee and its board of directors in choosing to remain independent.

This proposal is nothing but another of Doug Parker’s get rich quick schemes. For all the trashing of US management that goes on by their own employees, it should come as no surprise that they should not be able to see right through this.

This deal just became public but it is not a new deal. It has been shot down behind closed doors and it will now be shot down in public.

 

[whlinder]

Phew, I was getting worried about you WT...

I'm not sure about the anti-trust concerns; DL is still in bankruptcy and the DOJ could be fairly lenient as long as a few small divestitures are made at DCA and LGA.

 

[Bulscu]

A deal could be done in BK… that is not the issue. But there is a very high hurdle to be overcome – whether this deal could generate as good of a deal for DL’s creditors as they could get if DL remained independent. Further, there are no instances – NONE - of successful hostile takeovers in the airline industry.

The issue is that DL and US are substantial overlapping competitors across their entire system. You can’t just sell off a Shuttle and expect to make a merger between DL and US viable from an antitrust perspective. There are dozens of smaller cities – not hubs – that lose under a DL/US merger proposal. You cannot undo the anticompetitive affects of a DL/US merger w/o gutting what makes both airlines work. DL/US cannot and will not ever happen SOLELY on the basis of antitrust concerns. The fact that DL has said it will ask the government to block the merger on that basis makes it pretty clear that antitrust issues alone would stop this cold in its tracks.

DL and NW both know they could go into play while in BK. That is precisely why DL has said for months they had no intention of merging or being acquired by anyone. Despite all the hype, DL does have the exclusive right to formulate a plan of reorganization. While they now have to review the proposal and ensure their creditors support their position, this merger proposal is dead in the water. PERIOD. Even if other proposals arise, they still face a pretty high hurdle in ensuring as good of a return for DL’s creditors as they would get if DL were to emerge on its own.

You can bet all of the outstanding agreements DL has yet to sign will get signed very quickly. Airplane lessors, the PBGC, airports would all lose because a merger is based on shrinking capacity – all of which impacts every stakeholder. Do you honestly think HP pilots would support a merger w/ DL when they don’t even want to integrate seniority w/ US? HP pilots would be put ON THE STREET.

See the US presentation linked here:
http://yahoo.brand.edgar-online.com/EFX_dl...97K2EXV99W1_HTM

Carefully read the communication between Grinstein and Parker. See also that DL has said it has the backing of its creditors committee and its board of directors in choosing to remain independent.

This proposal is nothing but another of Doug Parker’s get rich quick schemes. For all the trashing of US management that goes on by their own employees, it should come as no surprise that they should not be able to see right through this.

This deal just became public but it is not a new deal. It has been shot down behind closed doors and it will now be shot down in public.

Here's the short version:



Fragmentation

&

GE




...i'm just trying to help with the ensuing habituation process. 😉





Good luck to all....

 

[FWAAA]

While I would partially agree with WT that this hostile takeover might not ever be consumated, I completely disagree with WT on the antitrust issue.

As I've posted numerous times (usually on threads where individuals who aren't lawyers lecture us on how the DOJ would never allow AA to buy NW), it ain't 2000 anymore. The LCCs have grown into very large airlines with plans to continue growing. Since demand for air travel has not kept up with their growth, someone needs to shrink, and that someone happens to be the six high-cost legacy airlines.

At the same time, DL and NW are limping along in bankruptcy. DL's operating margin for the 3rd quarter was pathetic. NW has reaped what it has sown - major labor troubles. They may not yet be "failing companies" but they're close. (WT: Since you previously failed to understand the meaning of that phrase in a different thread, please don't begin squawking about how Delta isn't failing.)

I agree with whlinder - some obvious divestitures (like the NE shuttle ops, as mentioned by DP) and the DOJ will probably say "OK."

 

[RowUnderDCA]

I agree with your observations about the new world order of the legacy carriers and antitrust review.. it's still going to mean giving up some gates in ATL and/or CLT.

But not enough to undo the deal.

I think that LCC's bid might be putting a floor under DAL's restructuring. Could this change DAL management's decision making environment.. .encouraging more shrinkage... like US/HP did??

 

[ekjkj]

I'm a Us Airways employee and heres why I think this will get approved (comming from the voice of experience). First the deal dosen't have to pass through the DOJ because the judge oversees the transaction and should fix any antitrust issues (at least the US/AWA and AA/TWA mergers didn't). Second if Doug can put together a plan and show that a merger would be better than DL emerging from bankruptcy as a stand alone carrier it would get approved (US had to go through it twice and UA is still not making money vs LCC). Third if DL comes up with a plan for reorganizing LCC still could provide the exit financing (i'm not positive this could of would happen).

Anyway it wont be all that bad Doug has done a fantastic job with the new company, I'm a former Piedmont employee so I know what it is like to work for a company who values their employees and Doug seems to like to run the company that way instead of the way US did. Ed

 

[LCC_#1]

This proposal is nothing but another of Doug Parker’s get rich quick schemes. For all the trashing of US management that goes on by their own employees, it should come as no surprise that they should not be able to see right through this.

Oh we saw it coming, WT. It was just a little surprising that it was actually DAL. I know many like you have a low opinion of your average US employee, but we see alot more than you think. 😉

 

[LCC_#1]

I'm a Us Airways employee and heres why I think this will get approved (comming from the voice of experience). First the deal dosen't have to pass through the DOJ because the judge oversees the transaction and should fix any antitrust issues (at least the US/AWA and AA/TWA mergers didn't). Second if Doug can put together a plan and show that a merger would be better than DL emerging from bankruptcy as a stand alone carrier it would get approved (US had to go through it twice and UA is still not making money vs LCC). Third if DL comes up with a plan for reorganizing LCC still could provide the exit financing (i'm not positive this could of would happen).

Anyway it wont be all that bad Doug has done a fantastic job with the new company, I'm a former Piedmont employee so I know what it is like to work for a company who values their employees and Doug seems to like to run the company that way instead of the way US did. Ed

I have to mirror what Ed said. You know, we have no say, you have no say, the passengers have no say, and neither does the city of Atlanta.

This I feel is certain. No matter WHAT we at US Airways do, we are plagued with poor name association and AWA was too regional. IF IF IF this happens, I have NO doubt Atlanta will STILL be KING!! Doug Parker is NOT all about money. Many will differ with me, but for the first time in 20 yrs, I feel someone wants to RUN this airline. I have NO DOUBT he will view the Delta name with much respect and preserve the quaility that comes with that name. As far as the HQ, who knows, but the new Delta will be eastcoast dominated and this just may change things.

I know that many have a low opinion of US Airways, but I do believe everything is in perception. Not much will change as the public will perceive Delta as the survival and your name is your most valued asset. Think about it, most people still think the old US Airways is running the show...WRONG...and that our HQ is in PIT (never was)...WRONG...so people will do the same IF this merger happens.

Regardless, good luck to all of us.

 

[brown]

It's really being discussed as a hostile takeover! I agree, the Government won't approve this!

True!!! Why should the government approve a airline merger. Only the huge oil companies as well as phone companies can merge!! Were there any questions on the Shell/Texaco, Chevron/Mobil, Union76/BP mergers? Talk of a monopoly. Verizon/MCI, AT&T/Cingular however there wasn't a soul in congress or the media who raised a single question. But god forbid a airline attempts to merge.

 

[Gilding the Lily]

A deal could be done in BK… that is not the issue. But there is a very high hurdle to be overcome – whether this deal could generate as good of a deal for DL’s creditors as they could get if DL remained independent. Further, there are no instances – NONE - of successful hostile takeovers in the airline industry.

The issue is that DL and US are substantial overlapping competitors across their entire system. You can’t just sell off a Shuttle and expect to make a merger between DL and US viable from an antitrust perspective. There are dozens of smaller cities – not hubs – that lose under a DL/US merger proposal. You cannot undo the anticompetitive affects of a DL/US merger w/o gutting what makes both airlines work. DL/US cannot and will not ever happen SOLELY on the basis of antitrust concerns. The fact that DL has said it will ask the government to block the merger on that basis makes it pretty clear that antitrust issues alone would stop this cold in its tracks.

DL and NW both know they could go into play while in BK. That is precisely why DL has said for months they had no intention of merging or being acquired by anyone. Despite all the hype, DL does have the exclusive right to formulate a plan of reorganization. While they now have to review the proposal and ensure their creditors support their position, this merger proposal is dead in the water. PERIOD. Even if other proposals arise, they still face a pretty high hurdle in ensuring as good of a return for DL’s creditors as they would get if DL were to emerge on its own.

You can bet all of the outstanding agreements DL has yet to sign will get signed very quickly. Airplane lessors, the PBGC, airports would all lose because a merger is based on shrinking capacity – all of which impacts every stakeholder. Do you honestly think HP pilots would support a merger w/ DL when they don’t even want to integrate seniority w/ US? HP pilots would be put ON THE STREET.

See the US presentation linked here:
http://yahoo.brand.edgar-online.com/EFX_dl...97K2EXV99W1_HTM

Carefully read the communication between Grinstein and Parker. See also that DL has said it has the backing of its creditors committee and its board of directors in choosing to remain independent.

This proposal is nothing but another of Doug Parker’s get rich quick schemes. For all the trashing of US management that goes on by their own employees, it should come as no surprise that they should not be able to see right through this.

This deal just became public but it is not a new deal. It has been shot down behind closed doors and it will now be shot down in public.

The timing couldn't be better for US Airways. The main goal during a merger is to cut costs and create synergy. Half of that equation, the cutting costs half, is already being performed by the Bankruptcy Court handling the Delta case.

In other words, usually the "buying" company would spend a significant amount of time and money in order to cut costs... and even then, they wouldn't ordinarily be able to cut health benefits and pensions with a snap of the fingers. But with the help of the bankruptcy court, US Airways would benefit from the judges recent decisions: 1) cut $50 million a year in health benefits for about 42,000 retirees, spouses and survivors; and 2) approved a request by Delta Airlines to end its pension plan for pilots.

DOJ and antitrust issues... not likely a problem. Lawyers who were involved with the proposed deals with United years ago (and now private lawyers) have mentioned that the DOJ would have decided differently had they known the airline industry disaster after 9/11.

The investors will be easy to win over because, with the company still in bankruptcy, Delta investors practically have no equity in the company. Thus, like most mergers, the purchased company's investors usually win in the short-term. Like I said: Perfect timing!

The only major concern, as World Traveler stated earlier, is the creditors ... more precisely, the unsecured creditors. The secured creditors are going to get their money back either way. The unsecured creditors, including the banks that gave "debtor-in-possession' financing will need to be persuaded. I don't believe there will be enough assets in the new company to pay off all of Delta's DIP debt. This is not necessary; but it has been deal busters in the past.

However, I believe there is another option. The new judge in the bankruptcy seems to be management friendly (look at his recent orders). If management happens to sign off on the deal, then I believe the judge will allow the deal... even if it requires a "cram-down" plan in bankruptcy.

 

[1 VF-1 2NV]

This announcement is just a way to have the airlines' stocks go up in value. That's all.

 

[flyingcat]

Carefully read the communication between Grinstein and Parker. See also that DL has said it has the backing of its creditors committee and its board of directors in choosing to remain independent.

Lets be pragmatic here Delta is not going to come out and say the creditors are not behind them. Remember they are creditors in bankruptcy court they are just trying to get their money. I highly doubt they give two shakes about the management all they want is whats owed them.

Besides you are assuming that Greensteen (sp?) even presented them the offer. I seriously doubt it. This is why US has DL management in a corner and the only ones that can save them are the people that have been offered a payout.

 

[LCC_#1]

This announcement is just a way to have the airlines' stocks go up in value. That's all.

I HIGHLY doubt that. Stocks traditionally sink for the aquiring company. What's amazing here is the vote of confidence Wall Street gave US Airways.

 

[ClueByFour]

I HIGHLY doubt that. Stocks traditionally sink for the aquiring company. What's amazing here is the vote of confidence Wall Street gave US Airways.

Buying up the share price of an airline means nothing. I'm sure the folks holding the old US at more than $60/share during the UA merger mania will agree. Or the folks who held US between the two bankruptcies.