Northwest a new target for US Airways?
Will US Airways Seek a New Target?
Wednesday January 31, 4:54 pm ET
By Chris Kahn, Associated Press Writer
US Airways Mum on Future Acquisition Plans, but Some See Another Try
PHOENIX (AP) -- With Delta off its plate, US Airways may go shopping again, given continuing pressure on the industry to consolidate and reduce the number of available airline seats, analysts said on Wednesday.
US Airways Group Inc. wouldn't comment about pursuing other deals, now that Delta Air Lines Inc.'s official creditors committee rejected its $9.8 billion hostile bid. US Airways promptly withdrew its buyout offer.
But analysts said CEO Doug Parker is known for aggressively snapping up bankrupt airlines and turning them around. And his recent success with his ongoing combination of America West and the bankrupt former US Airways has given him a lot of currency on Wall Street.
"US Airways wants to be a buyer rather than a seller," said Ray Neidl, an airline analyst with Calyon Securities in New York. "It's got a young, aggressive management team. They've done a good job turning around a troubled airline. They've got the confidence of the investment community. They can raise capital for an acquisition."
After announcing that US Airways had swung to a $303 million profit in 2006, Parker told reporters Tuesday that the only other viable company to buy this year would be Northwest Airlines Corp., which is set to emerge from Chapter 11 bankruptcy by June 30.
Parker said bankrupt airlines are particularly attractive because they make it easier to boost profits. A bankrupt airline can get out of expensive contracts and leases and put pressure on unions to renegotiate contracts.
"Not until you find airlines in financial distress will you see consolidation happen," Parker said.
Northwest spokesman Roman Blahoski wouldn't comment Wednesday if the carrier has spoken to US Airways about a deal, or whether the Minneapolis-based airline would be interested in one.
On Tuesday, Northwest Chief Executive Doug Steenland said the carrier has no plans to combine with another airline before it emerges from bankruptcy. However, Northwest has hired a consulting firm to help the company deal with any potential offers.
Northwest's Association of Flight Attendants spokesman Ricky Thornton said the union would support a US Airways deal if there were promises to benefit employees, and if the combined company were in a better financial position.
"A stronger carrier provides greater security for long-term viability of jobs, employment, retirement," Thornton said Wednesday. "Those are wonderful things for our people."
Northwest's flight attendants currently are fighting a proposed 40 percent cut in pay and benefits. Thornton said they're asking an appeals court for the right to strike.
Delta's management and pilots union have widely opposed combining with US Airways. The carrier's board of directors had previously rejected an $8 billion cash-and-stock bid that US Airways made in November.
US Airways sweetened its bid by 20 percent in January in hopes of attracting Delta's unsecured creditors. But Delta's official creditors committee rejected the $9.8 billion bid Wednesday and sided with Delta management's plan.
The Atlanta-based carrier expects to be worth $9.4 billion to $12 billion when it emerges from bankruptcy by the middle of the year.
After the announcement, US Airways officials wouldn't comment about any future bids for other airlines.
In a statement, the Tempe, Ariz.-based carrier said Delta's official creditors committee would not meet its demands by the airline's established deadline of Feb. 1, 2007.
"We are disappointed that the Committee, which has been chosen to act on behalf of all Delta creditors, is ignoring its fiduciary obligation to those creditors," Parker said in a statement. "Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta stand-alone plan."
Shares of US Airways gained $2.88, or 5.4 percent, to close at $55.98 Wednesday on the New York Stock Exchange. They have traded in a 52-week range of $28.35 to $63.27.
It has seemed to me for a long time that the route structures of US Airways and Northwest would be a very good fit. Clearly there are benefits, but I do see some drawbacks. The age of Northwest's fleet could be problematic. Also the fact that Northwest is very far along in the reorganization process to emerge from bankruptcy seems like another negative to a merger. Also, would the golden share Northwest holds for Continental Airlines factor in? What is everyone else's perspective on such a combination?