US Airways Proposes to Merge With Delta

[EvelynK72 Member Find all posts View Profile Close EvelynK72]

Just saw this on the US Airways website:

"US Airways Proposes to Merge With Delta

US Airways has announced a proposal to merge with Delta Air Lines. The transaction is valued at approximately $8.0 billion in cash and stock. The combination of US Airways and Delta would create one of the world’s largest airlines. As a combined company, the “New” Delta would be the number one airline across the Atlantic to Europe and the second largest airline to the Caribbean. The New Delta would reach more than 350 destinations across five continents, including North and South America, Europe, Asia and Africa. "

Yikes! US Airways hasn't even completed its merger with America West - their computer systems still don't talk to each other!! If this merger goes through, hopefully the integration would go faster.

Evelyn

[Carol C Senior Member Find all posts View Profile Close Carol C]

I just saw this too and immediately thought about how favorable bankruptcy laws are to big business in this country. An airline just out of bankruptcy has $8 billion lying around to acquire another airline in bankruptcy. I'd hate to be an airline employee at any of those airlines, cause there goes their pensions and other benefits. Cost containment will rule the day if that buyout goes through.

For me personally, I have friends who work at Delta. I also love that Atlanta is the biggest hub for Delta. I hope they don't take that away, I kinda doubt they would since ATL already has so much air traffic, either first or second nationwide. We'll see, won't we? Here's the article from New York Times:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

November 15, 2006
US Airways Makes $8 Billion Bid for Delta
By THE ASSOCIATED PRESS

Filed at 7:16 a.m. ET

TEMPE, Ariz. (AP) -- US Airways Group Inc. said Wednesday it has made an $8 billion cash and stock offer for Delta Air Lines Inc. in a deal that would create one of the world's largest airlines.

The offer to buy Delta once the Atlanta-based airline emerges from bankruptcy protection would give Delta's unsecured creditors $4 billion in cash and 78.5 million shares of US Airways stock.

US Airways said the offer is a 25 percent premium over the current trading price of Delta's pre-petition unsecured claims as of Tuesday, and a 40 percent premium over the average trading price for Delta unsecured claims over the last 30 days.

If the deal is completed, the airline would operate under the Delta name and serve more than 350 destinations across five continents.

Delta spokeswoman Thonnia Lee seemed surprised by the announcement Wednesday morning and said she could not yet comment on it in detail. But she said Delta has consistently said that it plans ''to emerge from bankruptcy as an independent airline.''

According to letters filed with the Securities and Exchange Commission, US Airways CEO Douglas Parker originally had a conversation with Delta Chief Executive Officer Gerald Grinstein about a combination of the two airlines in the spring and followed up with a letter to Grinstein on Sept. 29.

In a letter to Parker dated Oct. 17, Grinstein said he and Delta's board ''believe it would not be productive to engage in the type of exploratory discussions that you proposed at the time.''

US Airways Group, which was created after US Air emerged from bankruptcy and was acquired by America West last year, said the deal is expected to generate $1.65 billion in annual savings, from optimization of the airlines' complementary networks and combining facilities in overlap airports.

The deal would lead to a 10 percent cut in the combined airlines' capacity and also reduce unprofitable flying and improve the mix of traffic, US Airlines said. The company's statement did not specify which airports would be affected or whether there would be job cuts.

[Dave M Senior Member Find all posts View Profile Close Dave M]

US wouldn't spend any of its current cash on this deal. As your quoted article states, only $4 billion of the purchase price would be in cash. The rest would be in newly printed stock certificates. Meanwhile, US has secured a $7.2 billion financing commitment for the deal from Citigroup. All of the $4 billion would come from that financing.

DL won't go for the deal. It wants to operate as an independent airline rather than merge with another carrier. However, the $4 billion in cash, which would go to DL's current creditors, might well sway the bankruptcy creditors' committee. If that happens, anything is possible.

[bigfrank Administrator Find all posts View Profile Close bigfrank]

Delta Just said no thank you.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

In bankruptcy, it is the creditors committee and the bankruptcy judge whose opinion matters, not management.

If this happens, one wonders about which alliance the merged airline would be in - USAirways is in the Star Alliance while Delta is in SkyTeam.