General Lee
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AP
US Airways Offer to Buy Delta Questioned
Wednesday January 24, 4:36 pm ET
By Alan Zibel Senators Voice Fears of Service Cutbacks Regarding US Airways' Offer to Buy Delta
WASHINGTON (AP) -- The chief executive of US Airways Group Inc. faced tough questioning at a Senate hearing Wednesday as lawmakers fretted that his company's proposed hostile takeover of Delta Air Lines Inc. would harm consumers, particularly those in rural areas.
Doug Parker, chief executive of Tempe, Ariz.-based US Airways, argued that the nearly $10 billion acquisition of Atlanta-based Delta would result in an efficiently run carrier that could offer low fares to fliers. He urged lawmakers to "let the market work."
Several senators said their constituents are concerned that a merger would result in cutbacks to service in small communities, where the per-unit costs of running an airline tend to be more expensive than in big cities with lots of passenger traffic.
"You're an aggressive suitor, but the lady from the South doesn't want to be forced into this shotgun wedding," said Sen. Trent Lott, R-Miss, a reference to Delta's Atlanta headquarters.
On Jan. 10, US Airways increased its bid for Delta by nearly 20 percent, but Delta's CEO remains cool to the offer.
Delta's official committee of unsecured creditors, which will play a key role in deciding whether any merger agreement would move forward, has not issued a statement about its position since US Airways increased its offer.
"The surest, safest bet from the creditors' point of view is to go ahead with our stand-alone business plan," Delta Chief Executive Gerald Grinstein told reporters Wednesday.
Grinstein, in testimony before the committee, called US Airways' hostile bid "blatantly anticompetitive," and a "poster child of the worst kind of merger," estimating that 10,000 jobs would likely be eliminated. Parker disputed that figure, saying any job losses would be gradual and through attrition, rather than layoffs.
Despite his opposition to US Airways' offer, Grinstein said in a newsletter sent to employees Tuesday that a merger can't be ruled out for Delta after it exits bankruptcy. Grinstein also said Delta is "not negotiating" a merger with Northwest Airlines, denying reports in the Wall Street Journal.
US Airways shares rose 8 cents to close at $53.35 on the New York Stock Exchange.
Parker, who led America West Airlines' 2005 merger with US Airways, argued that the merger would lead to lower prices for consumers because the company would be in a better position to compete with low-cost carriers such as JetBlue Airways Corp. and Southwest Airlines Co. The growth of those competitors he said, shows the "tendency of the marketplace to respond."
"New carriers can come in and lower prices," Parker said.
Both airline executives said the industry has made important strides toward rebounding from the financial troubles that they incurred as result of the 2001 terrorist attacks and soaring fuel prices.
Delta is planning to come out of Chapter 11 bankruptcy by midyear as an independent company, and is planning for a Feb. 7 bankruptcy court hearing in New York to discuss the details of its bankruptcy exit plan. US Airways has said it will revoke its takeover bid if Delta's creditors do not postpone that hearing by Feb. 1.
More than 30 uniformed Delta pilots packed the Senate hearing room Tuesday to show their opposition to the merger, which they said would lead to job reductions.
"We are not against mergers, we are not against consolidation. What we are opposed to is this merger," said Robert L. "Buzz" Hazzard, a Delta pilot and spokesman for the Air Line Pilots Association International.
Delta Bonds Down As Merger, Buyout Appear Less Likely
DOW JONES NEWSWIRES
January 24, 2007 2:58 p.m.
By Cynthia Koons
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Delta Air Lines Inc. (DALRQ) bonds
fell Wednesday on mounting opposition to the US Airways
proposal to buy the bankrupt airline.
Delta's Chief Executive Gerald Grinstein told the Senate
Commerce Committee Wednesday that a merger between US
Airways Group Inc. (LCC) and Delta would likely trigger a
renewed spate of consolidation on the industry.
This news comes a day after The Wall Street Journal reported
US Airways' hostile bid was losing traction with Delta
creditors, which also drove Delta's bonds down.
Delta's 8.3% notes due 2029 lost 1.438 points on the day and
5.060 points on the week, to 64.5 cents on the dollar,
according to MarketAxess, an online bond trading platform.
"The merger fever seems to be subsiding in general, in the
last couple days," Roger King, a CreditSights analyst, said.
"It doesn't look like the US Airways bid is going to be
successful. It's hard to say how much discussion Delta and
Northwest had, but it doesn't sound like it's been much."
On Wednesday, Grinstein dismissed reports that Delta has
been talking to Northwest Airlines (NWACQ) about a possible
merger. Northwest's 10% notes due 2009 dropped 1.875 to
99.875 and its 9.875% issue due 2007 lost 1.25 to 101.5 in
active trade.
Grinstein said Delta recently retained an investment banker
to obtain information from Northwest at the behest of
Delta's creditors committee. But he said the move was just
part of what many carriers do to analyze and update
potential responses to the industry's changing marketplace.
Yet the bond activity was more of a reaction to the US
Airways news, said Raymond Neidl, an analyst at Calyon
Securities.
"I was one of the more skeptical analysts about this deal
from the beginning, for various reasons, one of the reason
being the regulators, so it's no surprise what's unfolding,"
he said of Grinstein's Senate testimony Wednesday. "This is
a small factor compared to the Delta's creditor committee if
they want to go ahead with this."
He said US Airways doesn't have much time to convince
creditors to approve the buyout, either, considering Delta
plans to emerge from bankruptcy by April.
As far as other bidders go, King said AMR Corp.'s (AMR)
American Airlines, Continental Airlines Inc. (CAL) and UAL
Corp.'s (UAUA) United have been quiet.
"There's not much news right now to support any merger
valuations," King said. "That's not to say something's not
going to happen, but things have definitely cooled off in
the near term here."
Bye Bye--General Lee
US Airways Offer to Buy Delta Questioned
Wednesday January 24, 4:36 pm ET
By Alan Zibel Senators Voice Fears of Service Cutbacks Regarding US Airways' Offer to Buy Delta
WASHINGTON (AP) -- The chief executive of US Airways Group Inc. faced tough questioning at a Senate hearing Wednesday as lawmakers fretted that his company's proposed hostile takeover of Delta Air Lines Inc. would harm consumers, particularly those in rural areas.
Doug Parker, chief executive of Tempe, Ariz.-based US Airways, argued that the nearly $10 billion acquisition of Atlanta-based Delta would result in an efficiently run carrier that could offer low fares to fliers. He urged lawmakers to "let the market work."
Several senators said their constituents are concerned that a merger would result in cutbacks to service in small communities, where the per-unit costs of running an airline tend to be more expensive than in big cities with lots of passenger traffic.
"You're an aggressive suitor, but the lady from the South doesn't want to be forced into this shotgun wedding," said Sen. Trent Lott, R-Miss, a reference to Delta's Atlanta headquarters.
On Jan. 10, US Airways increased its bid for Delta by nearly 20 percent, but Delta's CEO remains cool to the offer.
Delta's official committee of unsecured creditors, which will play a key role in deciding whether any merger agreement would move forward, has not issued a statement about its position since US Airways increased its offer.
"The surest, safest bet from the creditors' point of view is to go ahead with our stand-alone business plan," Delta Chief Executive Gerald Grinstein told reporters Wednesday.
Grinstein, in testimony before the committee, called US Airways' hostile bid "blatantly anticompetitive," and a "poster child of the worst kind of merger," estimating that 10,000 jobs would likely be eliminated. Parker disputed that figure, saying any job losses would be gradual and through attrition, rather than layoffs.
Despite his opposition to US Airways' offer, Grinstein said in a newsletter sent to employees Tuesday that a merger can't be ruled out for Delta after it exits bankruptcy. Grinstein also said Delta is "not negotiating" a merger with Northwest Airlines, denying reports in the Wall Street Journal.
US Airways shares rose 8 cents to close at $53.35 on the New York Stock Exchange.
Parker, who led America West Airlines' 2005 merger with US Airways, argued that the merger would lead to lower prices for consumers because the company would be in a better position to compete with low-cost carriers such as JetBlue Airways Corp. and Southwest Airlines Co. The growth of those competitors he said, shows the "tendency of the marketplace to respond."
"New carriers can come in and lower prices," Parker said.
Both airline executives said the industry has made important strides toward rebounding from the financial troubles that they incurred as result of the 2001 terrorist attacks and soaring fuel prices.
Delta is planning to come out of Chapter 11 bankruptcy by midyear as an independent company, and is planning for a Feb. 7 bankruptcy court hearing in New York to discuss the details of its bankruptcy exit plan. US Airways has said it will revoke its takeover bid if Delta's creditors do not postpone that hearing by Feb. 1.
More than 30 uniformed Delta pilots packed the Senate hearing room Tuesday to show their opposition to the merger, which they said would lead to job reductions.
"We are not against mergers, we are not against consolidation. What we are opposed to is this merger," said Robert L. "Buzz" Hazzard, a Delta pilot and spokesman for the Air Line Pilots Association International.
Delta Bonds Down As Merger, Buyout Appear Less Likely
DOW JONES NEWSWIRES
January 24, 2007 2:58 p.m.
By Cynthia Koons
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Delta Air Lines Inc. (DALRQ) bonds
fell Wednesday on mounting opposition to the US Airways
proposal to buy the bankrupt airline.
Delta's Chief Executive Gerald Grinstein told the Senate
Commerce Committee Wednesday that a merger between US
Airways Group Inc. (LCC) and Delta would likely trigger a
renewed spate of consolidation on the industry.
This news comes a day after The Wall Street Journal reported
US Airways' hostile bid was losing traction with Delta
creditors, which also drove Delta's bonds down.
Delta's 8.3% notes due 2029 lost 1.438 points on the day and
5.060 points on the week, to 64.5 cents on the dollar,
according to MarketAxess, an online bond trading platform.
"The merger fever seems to be subsiding in general, in the
last couple days," Roger King, a CreditSights analyst, said.
"It doesn't look like the US Airways bid is going to be
successful. It's hard to say how much discussion Delta and
Northwest had, but it doesn't sound like it's been much."
On Wednesday, Grinstein dismissed reports that Delta has
been talking to Northwest Airlines (NWACQ) about a possible
merger. Northwest's 10% notes due 2009 dropped 1.875 to
99.875 and its 9.875% issue due 2007 lost 1.25 to 101.5 in
active trade.
Grinstein said Delta recently retained an investment banker
to obtain information from Northwest at the behest of
Delta's creditors committee. But he said the move was just
part of what many carriers do to analyze and update
potential responses to the industry's changing marketplace.
Yet the bond activity was more of a reaction to the US
Airways news, said Raymond Neidl, an analyst at Calyon
Securities.
"I was one of the more skeptical analysts about this deal
from the beginning, for various reasons, one of the reason
being the regulators, so it's no surprise what's unfolding,"
he said of Grinstein's Senate testimony Wednesday. "This is
a small factor compared to the Delta's creditor committee if
they want to go ahead with this."
He said US Airways doesn't have much time to convince
creditors to approve the buyout, either, considering Delta
plans to emerge from bankruptcy by April.
As far as other bidders go, King said AMR Corp.'s (AMR)
American Airlines, Continental Airlines Inc. (CAL) and UAL
Corp.'s (UAUA) United have been quiet.
"There's not much news right now to support any merger
valuations," King said. "That's not to say something's not
going to happen, but things have definitely cooled off in
the near term here."
Bye Bye--General Lee
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