Delta Officially Rejects US Air Bid...

[On Your Six]

Delta rejects US Air bid


Tuesday December 19, 7:58 am ET

NEW YORK (Reuters) - Delta Air Lines Inc. (Other OTC:DALRQ.PK - News) said on Tuesday its board rejected an $8.4 billion bid from US Airways Group Inc. (NYSE:LCC - News) and filed its own plan to emerge from bankruptcy as an independent airline.


Delta has repeatedly said that it intends to emerge from Chapter 11 protection as a stand-alone carrier, but this is the first time the Atlanta-based airline has rejected outright the US Airways bid, which was made last month.

Delta, the No. 3 U.S. carrier, said its five-year business plan filed with a U.S. bankruptcy court values the company at about $9.4 billion to $12 billion, and would result in a recovery for Delta's unsecured creditors of about 63 percent to 80 percent of their allowed claims.

Atlanta-based Delta said its board had concluded that its plan would provide the company's creditors with better value, greater certainty and a much faster timetable than the US Airways proposal.

"We will emerge as a thoroughly new Delta that will be a strong global carrier with a solid foundation for profitable growth in a highly competitive environment," Chief Executive Gerald Grinstein said in a statement. The airline, which has been operating under bankruptcy protection since September 2005, said it intends to emerge from Chapter 11 in the spring of 2007. The business plan projects a return to profitability in 2007 and an increase in net income, after profit sharing, from about $500 million in 2007 to some $1.2 billion in 2010. The airline also expects to cut its net long-term debt by more than half to about $7.5 billion in 2007 from about $17 billion in 2005.


It will be interesting to see Parker's reaction. Sure you can put a big financial deal together with bank help, but that won't guarantee success in a service business... Hostile takeovers don't work in service businesses where employee participation and customer service levels are so critical. Delta appears to be trending positive and it doesn't require "support" from other carriers to succeed in the future. We'll see what happens but it would be a big uphill battle for Parker if he continues...

 

[BoilerUP]

Does it really matter what the DAL BOD wants, or for that matter, what the MEH BOD wants? Haven't both of these offers basically been hostile takeover offers directly to the shareholders and creditors?

I am aware MEH has a "poison pill" provision to double their outstanding shares in case of a hostile takeover, but does DAL have any such protection?

 

[TWA Dude]

Wow. I'm surprised that General Lee didn't see this coming. He must be losing his prognosticative ability.

But ... we still haven't heard from the creditor's committee. Does GL have any prediction on this?

 

[YourPilotFriend]

The combination of DAL/US would result in a loss of at least 2000 pilots, most of which are regional jobs.

 

[General Lee]

Wow. I'm surprised that General Lee didn't see this coming. He must be losing his prognosticative ability.

But ... we still haven't heard from the creditor's committee. Does GL have any prediction on this?

Ummmmmmmm, well, I don't think it will go through...???

Bye Bye--General Lee

 

[General Lee]

Does it really matter what the DAL BOD wants, or for that matter, what the MEH BOD wants? Haven't both of these offers basically been hostile takeover offers directly to the shareholders and creditors?

I am aware MEH has a "poison pill" provision to double their outstanding shares in case of a hostile takeover, but does DAL have any such protection?

The poison pill for this deal with Delta would be bringing back the pensions for the pilots, since Parker's savings were based on not having the pilot pensions included. I don't think that will happen, though.

And, it may not really matter what the BOD wants, but the Judge does listen to them, and most of the creditors on the unsecured creditor committee (Dalpa, Boeing, Coke, Pratt, the PBGC) are viewed as "allies." They will make the ultimate decisions.

And one more poison pill could be the overlap. Anyone, and I mean anyone, can tell by putting the two route maps over each other that there is HUGE overlap. The DOJ doesn't like that. Neither does Oberstar. It was a poison pill to even suggest this merger.

From Oberstar himself:


Oberstar said that by publicly exposing the potential dangers of airline consolidation, his committee may be able to "throw cold water" on merger mania. "We can nudge the Justice Department to take the action they must" to prevent a loss in competition, he said.
Oberstar also said opposition to consolidation is bipartisan. "I’ve heard from members on both sides of the aisle" as worries have grown about the impact on jobs and service, he said. "I haven’t heard anyone come forward and say this is a really good deal."



Bye Bye---General Lee

 

[crjdxr]

What's to prevent Parker from selling off the "poison pill" overlap?

 

[On Your Six]

What's to prevent Parker from selling off the "poison pill" overlap?

What would Parker do with all of the resulting surplus employees he claimed he wouldn't have to fire in the proposed merger? Yeah, that would be great for morale and resulting service levels...

Doug needs to wake up and back off...

 

[General Lee]

What's to prevent Parker from selling off the "poison pill" overlap?

Will Southwest, Airtran, or JB fly to the smaller SC, WV, and VA cities that will lose service in a US/DL takover? Would they fly 737s to Florence, SC or Huntington, WV? I really doubt it. There are many, many cities that are too small for LCC mainline service, and Oberstar and company know it. Local politicians are probably calling him right now, stating their opposition.

Bye Bye--General Lee

 

[BoilerUP]

Will Southwest, Airtran, or JB fly to the smaller SC, WV, and VA cities that will lose service in a US/DL takover?
Bye Bye--General Lee

Are there any verifiable facts that any of the cities you speak of would lose service?

 

[Flys4Fun]

Are there any verifiable facts that any of the cities you speak of would lose service?

They're EAS cities. Someone would pick them up...be it Great Mistakes or whoever... That or some clown would be losing out on free government cheese.

 

[luckytohaveajob]

What would Parker do with all of the resulting surplus employees he claimed he wouldn't have to fire in the proposed merger? Yeah, that would be great for morale and resulting service levels...

Doug needs to wake up and back off...

Doug would make sure that at age 60 they retire. US Air retirements would keep everyone else on property.

 

[General Lee]

Are there any verifiable facts that any of the cities you speak of would lose service?

So, if only two airlines served a city (Florence, Huntington, Lynchburg) and they merged, with hubs 220nm apart, do you really think they would keep service to BOTH hubs? Huh? Really? No way. Remember Parker stating "Synergies...." What do you think that would mean?


Bye Bye--General Lee

 

[General Lee]

They're EAS cities. Someone would pick them up...be it Great Mistakes or whoever... That or some clown would be losing out on free government cheese.

Wrong. Look what Ashcroft objected to in the proposed USAir/UAL merger. Read the last line:


Justice Department Rejects Proposed US Airways, United Airlines Merger.

From: Knight Ridder/Tribune Business News | Date: July 28, 2001

http://www.highbeam.com/Aspx/GetPubL...usine ss+News

The Charlotte Observer, N.C. Knight Ridder/Tribune Business News
Jul. 28--The US Airways deal is dead.
The Justice Department strongly rejected United Airlines' planned $12.3 billion takeover of US Airways Friday, saying it would have reduced competition, raised fares and harmed airline passengers.
"While mergers can further competition, this one does not," said Attorney General John Ashcroft. "If this acquisition were allowed to proceed, millions of consumers would have little choice but to pay higher fares and accept lower quality air service."



Lower quality air service? I think that would mean most EAS airlines. The ones not flying planes with bathrooms, or connecting service at hubs. If an EAS airline flew in there from one of the current cities served (CLT or ATL), they would be parked at a remote stand, and the ticket counter would be 2 miles from anywhere. Nope, and local politicians would say NO. Oberstar likes CHOICE for consumers, but not bad choices. And, most EAS cities do NOT have a choice of airlines. Mesa was awarded some recently---Ceder City, UT, and Merced, CA.


Bye Bye--General Lee

 

[TWA Dude]

Take that, Delta!

http://biz.yahoo.com/prnews/061219/latu086.html?.v=83

Press ReleaseSource: US Airways

US Airways Comments on Delta Standalone Plan
Tuesday December 19, 1:43 pm ET
TEMPE, Ariz., Dec. 19 /PRNewswire-FirstCall/ -- US Airways Group, Inc. (NYSE: LCC - News) today commented on the release of Delta Air Lines Inc.'s (OTC: DALRQ - News) standalone plan for its Chapter 11 restructuring.

Doug Parker, US Airways' Chairman and CEO said, "We have always expected that Delta would file a standalone plan with the Bankruptcy Court. This plan will provide Delta creditors with a benchmark against which to evaluate the competing proposals and we welcome that comparison. This is an important step in a process that we believe will result in the merger of US Airways and Delta.
"Combining US Airways and Delta will create at least $1.65 billion in annual synergies beyond the value that could be created by any standalone plan. These synergies come on top of the certainty of $4.0 billion in cash and the upside potential of 78.5 million shares of US Airways stock. These shared synergies will benefit all shareholders in the 'New' Delta. Factoring the synergy benefits into our offer, the current value of our proposal is significantly greater than the value of Delta's standalone plan. "We remain a disciplined and determined bidder for Delta. We continue to work productively with the Creditors Committee and the Ad Hoc Bondholders Committee. Finally, we recognize and appreciate the creditors' ultimate authority in this process."

 

[737 Pylt]

http://biz.yahoo.com/prnews/061219/latu086.html?.v=83

Press ReleaseSource: US Airways

US Airways Comments on Delta Standalone Plan
Tuesday December 19, 1:43 pm ET
TEMPE, Ariz., Dec. 19 /PRNewswire-FirstCall/ -- US Airways Group, Inc. (NYSE: LCC - News) today commented on the release of Delta Air Lines Inc.'s (OTC: DALRQ - News) standalone plan for its Chapter 11 restructuring.

Doug Parker, US Airways' Chairman and CEO said, "We have always expected that Delta would file a standalone plan with the Bankruptcy Court. This plan will provide Delta creditors with a benchmark against which to evaluate the competing proposals and we welcome that comparison. This is an important step in a process that we believe will result in the merger of US Airways and Delta.
"Combining US Airways and Delta will create at least $1.65 billion in annual synergies beyond the value that could be created by any standalone plan. These synergies come on top of the certainty of $4.0 billion in cash and the upside potential of 78.5 million shares of US Airways stock. These shared synergies will benefit all shareholders in the 'New' Delta. Factoring the synergy benefits into our offer, the current value of our proposal is significantly greater than the value of Delta's standalone plan. "We remain a disciplined and determined bidder for Delta. We continue to work productively with the Creditors Committee and the Ad Hoc Bondholders Committee. Finally, we recognize and appreciate the creditors' ultimate authority in this process."

I love how parker like to throw the word synergies around.....Why don't you just come out and say it doogie. The newly revamped DL will kick the snot out of US Airways, and you are trying to squash it. I don't blame him really, but maybe he should focus on getting his own house in order before trying to come over and try to remodel ours!
If I were a US Airways pilot, I'd be livid at the fact he can come up with $8.7Bil but can't get a contract for better wages with the money the "new US Airways" is making!
Bye bye doogie!

737

 

[General Lee]

http://biz.yahoo.com/prnews/061219/latu086.html?.v=83

Press ReleaseSource: US Airways

US Airways Comments on Delta Standalone Plan
Tuesday December 19, 1:43 pm ET
TEMPE, Ariz., Dec. 19 /PRNewswire-FirstCall/ -- US Airways Group, Inc. (NYSE: LCC - News) today commented on the release of Delta Air Lines Inc.'s (OTC: DALRQ - News) standalone plan for its Chapter 11 restructuring.

Doug Parker, US Airways' Chairman and CEO said, "We have always expected that Delta would file a standalone plan with the Bankruptcy Court. This plan will provide Delta creditors with a benchmark against which to evaluate the competing proposals and we welcome that comparison. This is an important step in a process that we believe will result in the merger of US Airways and Delta.
"Combining US Airways and Delta will create at least $1.65 billion in annual synergies beyond the value that could be created by any standalone plan. These synergies come on top of the certainty of $4.0 billion in cash and the upside potential of 78.5 million shares of US Airways stock. These shared synergies will benefit all shareholders in the 'New' Delta. Factoring the synergy benefits into our offer, the current value of our proposal is significantly greater than the value of Delta's standalone plan. "We remain a disciplined and determined bidder for Delta. We continue to work productively with the Creditors Committee and the Ad Hoc Bondholders Committee. Finally, we recognize and appreciate the creditors' ultimate authority in this process."

I love how he tries to give creditbility to the "adhoc bondholders committee." They really have no say, and they formed the committee because the larger creditors didn't really want to look at the USAir offer.

I thought it was interesting that Grinstein stated today that USAir would be the "worst" combination if any mergers were to occur with Delta. He has it right. Parker will hear it from the DOJ and the creditors eventually.


Bye Bye--General Lee

 

[crjdxr]

Will Southwest, Airtran, or JB fly to the smaller SC, WV, and VA cities that will lose service in a US/DL takover? Would they fly 737s to Florence, SC or Huntington, WV? I really doubt it. There are many, many cities that are too small for LCC mainline service, and Oberstar and company know it. Local politicians are probably calling him right now, stating their opposition.

Bye Bye--General Lee

Are they too small for another legacy's regional service or E-Jets from JB?

I'll admit that it might be improbable, but that does not make it impossible.

 

[Tomct]

I believe that Delta will emerge as a Stand Alone carrier and will get bigger and better with time. "Six" I agree with you....US is TERRIFIED of what the new Delta will do to his company! GOOOOO BIG D!!!

 

[General Lee]

Are they too small for another legacy's regional service or E-Jets from JB?

I'll admit that it might be improbable, but that does not make it impossible.

You are right, it is not impossible. But, the cities are small enough to maybe fill a couple RJs a day and a few Dash 8s. I don't think JB or AT would want to put E190s or 717s in there. Still, service and choice is needed.

Bye Bye--General Lee

 

[General Lee]

More about the unsecured creditor committee

Ultimately, the unsecured creditors committee in the bankruptcy case will play a key role in determining Delta's fate. The committee has not said whether it will support Delta's plan, US Airways' plan or any other offer to buy Delta that may come in. A lawyer for the committee, Daniel Golden, did not immediately return a call Tuesday seeking comment. Rochelle said Delta would likely wait to hear from the creditors committee about its views before soliciting votes on its plan.
Delta also said Tuesday that its board has unanimously rejected US Airways' unsolicited offer, disclosed Nov. 15. Delta employees held rallies at airports serving several cities, including Cincinnati, Boston and Columbia, S.C., protesting US Airways' bid; Delta executives attended a similar rally in Atlanta. Executives also issued strong statements against the merger proposal and held several conference calls with analysts to back up their belief that the US Airways offer won't work.
An official with knowledge of US Airways' plans who spoke on condition of anonymity because of the sensitivity of the talks said Monday that US Airways was willing to increase its offer if Delta could justify it is worth more.
But Delta said Tuesday it believes flying solo is the best proposal for everyone involved.
"Their proposal is a bad deal for Delta and its creditors," Grinstein said of US Airways.
US Airways shares fell 59 cents, or 1.1 percent, to $55.21 in early afternoon trading Tuesday on the New York Stock Exchange, putting the value of its bid for Delta at $8.3 billion.
Delta said it believes the US Airways deal is not likely to gain regulatory approval. It also cited as obstacles: overwhelming labor issues and "flawed economic assumptions."
Delta's chief financial officer, Ed Bastian, said in a conference call with reporters Tuesday that Delta so far has not received buyout bids from any airline other than US Airways. He also said Delta has "not been approached about any other merger proposals."
Bastian said Delta showed its reorganization plan to its creditors committee last week. He would not say how creditors specifically reacted, but he said he believes the committee will ultimately support Delta's plan. Delta said US Airways continues to experience significant integration problems with its prior, smaller deal with America West. It believes US Airways is not equipped to simultaneously integrate a substantially larger company like Delta.


Bye Bye--General Lee

 

[DustyBottoms]

If I were a US Airways pilot, I'd be livid at the fact he can come up with $8.7Bil but can't get a contract for better wages with the money the "new US Airways" is making!

737

That makes a lot of sense.