USAir offers to buy Delta?
 

Just saw this on CNN.

"News Alert>> US Airways makes offer to buy Delta Air Lines for $8 billion in cash and stock once Delta emerges from bankruptcy."

That's all the information that was posted. Anyone?

From Bloomberg.com:

US Airways Offers $8 Billion in Cash and Shares for Delta Air

By Brendan Walsh

Nov. 15 (Bloomberg) -- US Airways Group Inc. said today it has proposed merging with Delta Air Lines Inc., which is currently operating under bankruptcy protection.

Delta's creditors would receive $4 billion in cash and 78.5 million shares of US Airways, which would be worth about $4 billion based on the stock's closing price yesterday, US Airways said in a statement distributed by PR Newswire.

To contact the reporter on this story: Brendan Walsh in New York at [email protected]

There are a lot of "ifs" and "maybes" until this is a done deal. I hope this does't spark a wave of mergers. This will lead to less pilot jobs at the majors. USA+DAL and CAL+UAL and NWA+AAL = lots of furloughs. I'm a 2005 hire, so I'll be gone. :mad:

It also means a lot better and more secure profession with better pay and QOL for you pax guys.

The news in ATL is reporting that Delta has said they're not interested in the offer and US Air is offering $1.25 on the dollar for Delta stock. Hostile takeover?

WOuldn't it be a good thing? I remember reading where delta was tryingt o get more atlantic routes once. If USA took over wouldn't they basically keep the same routes but restructure. Seems like it would be better because of the larger pilot base unions ect would be more powerful. One less companies to worry about during a strike taking advantage of the pilots again.

Grimstein repeatedly stated no mergers. He says Delta will emerge as a stand-alone airline.

He can say whatever he wants, but if the price is right, it'll be a done deal.

I had heard today on FOX News that a hostile takeover of DAL was possible by US Airways. Now, given I heard this on the media would this be a possible or do you think its typical media speculation.

Ahh, found out where the hostile takeover came from.
 

U.S. Airways makes $8 billion bid for Delta
Merger would create top trans-Atlantic carrier; Delta hasn't yet agreed
PrintE-mailDisable live quotesRSSDigg itDel.icio.usRelated Blog Posts & ArticlesBy Aude Lagorce, MarketWatch
Last Update: 8:07 AM ET Nov 15, 2006



LONDON (MarketWatch) -- U.S. Airways Group on Wednesday said it has made an $8 billion cash-and-stock offer for bankrupt Delta Air Lines in a move that would create the No. 1 trans-Atlantic carrier, and could spark further industry consolidation.
Under the proposal, which would take effect upon Delta's (DALRQ : Delta Air Lines, Inc.
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9:04am 11/15/2006

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DALRQ1.47, +0.05, +3.5%) emergence from bankruptcy, Delta creditors would receive $4 billion in cash and 78.5 million shares of U.S. Airways' stock, with an aggregate value of approximately $4 billion.
The offer represents a 25% premium to the trading price of Delta's pre-petition unsecured claims as of Tuesday. U.S. Airways (LCC : US Airways Group Inc.
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8:13am 11/15/2006

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LCC50.93, -0.60, -1.2%) shares closed down 1.2% at $50.93 on Tuesday.
"It may be the first signs of the regeneration of the U.S. airline industry," said Doug McVitie of Arran Aerospace, based in France. "It will also have a knock-on effect on the likes of JetBlue and Southwest, and trigger some more consolidation."
U.S. Airways CEO Doug Parker said in a letter to Delta chief Gerald Grinstein that the airline decided to launch a hostile bid after Grinstein declined a meeting. A copy of that letter was released along with news of the bid. "...the benefits of a merger of U.S. Airways and Delta are so compelling to both of our companies' stakeholders, we believe it is important to inform them about our proposal," Parker said in the letter.
Delta officials weren't immediately available for comment.
Under the deal, which U.S. Airways said would create at least $1.65 billion in annual synergies, the two carriers would form a new airline operating under Delta's name.
The "New" Delta would be the No. 1 airline across the Atlantic and the second-largest airline to the Caribbean, said U.S. Airways. It would fly to more than 350 destinations across five continents.
"In the U.S., the combination would create a leading competitor in the Eastern U.S. and an enhanced position in the Western U.S," said U.S. Airways (LCC : US Airways Group Inc.
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Competitors would include low-cost carriers such as JetBlue Airways (JBLU : jetblue awys corp com
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8:15am 11/15/2006

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U.S. Airways expects $1.65 billion in annual synergies to be phased in over two years. That total includes $935 million in network synergies, which would come from the optimization of the airlines' networks and result in a 10% reduction in capacity.
Deal could face turbulence
One aviation expert said the merger could present some problems.
"It's a very tentative proposal," said Keith McMullan of London-based consultancy Aviation Economics.
"There are some complementarities in the networks, but unless some significant cost-cutting takes place I don't think the merger would have much chance of success. Delta still has a lot of union costs and legacy issues," McMullan added.
Another U.K. aviation consultant, Peter Hearne of Aeroex, questioned the financial sturdiness of a potential deal. Hearne said he believes Delta is the more mature and the better-managed of the two carriers.
"I'm surprised they [U.S. Airways] got the money," Hearne said. "Their financials have been unsteady over the years. They have also overextended themselves in the past and then had to cut back."
Consumers said to benefit
U.S. Airways emphasized that the deal would likely result in lower prices for travelers.
"Consumers will have the advantages of a larger, full-service airline with the cost structure of a low-fare carrier, and the communities we serve, as well as those Delta serves, will have access to a wider range of network options," Parker said.
Since its merger with America West, U.S. Airways said it has lowered fares in nearly 350 markets, with discounts ranging from 10% to 75%.
The downturn in airfares and high fuel prices sent Delta into bankruptcy in September 2005.
Aude Lagorce is a reporter for MarketWatch in London.

FWIW, I don't think it's possible. I don't think Parker will be able to get everyone to sign off on it and it just doesn't make sense. Then again, "That's the signpost up ahead - your next stop. The Twilight Zone!" This has Ringling Brothers written all over it and is nothing more than media ploy by Parker. I guess everyone forgot the failed attempt with US Airways and United in 2000 or 99. I know this is a different time, but it'll never fly - no pun intended.

J

From the US Air website...


Dear US Airways Employee,

Are you sitting down?

I have some big news this morning that will surprise some, stun others and – I hope – spark the imagination and competitive spirit in all of us.

This morning we made a proposal to merge with Delta Air Lines. We’ve approached Delta and their creditors with an offer of approximately $8 billion in cash and equity that we would raise in the financial markets. If successful, we would become one of the world’s largest airlines and serve more than 350 destinations on five continents.

Before you ask the obvious question (Gee, Doug, does it really have to be about how big we are and shouldn’t it be more about how good our service/operation is?), let me ask you to step back a bit and look at the larger, long-term picture.

Of course, we have a lot of work right now as we finish our integration. Work continues on the reservations migration, operating certificate and labor contracts.

So while we would prefer that this opportunity wait for that work to be completed, the fact is the world is not going to wait for us. The industry is evolving. Opportunities to grow, expand our network and create a more secure future for our airline don’t come along very often. If we don’t take these opportunities when they present themselves, someone else will.

A lot of people were skeptical about the America West/US Airways combination. We’ve proven them wrong: we’re recalling employees and hiring new people, we’re hitting our integration goals and quickly fixing the inevitable problems that have cropped up during integration and we’re doing all of this profitably.

As a result, we’re a much more successful airline than many thought possible a year ago.

That kind of opportunity exists again for us. A US Airways/Delta combination will give employees a more stable global enterprise, well-positioned for long-term success, able to compete effectively with any type of carrier and better able to weather economic downturns and industry volatility.

Our new airline would have a market share of approximately 18 percent, just slightly larger than the current largest carrier. We would be the largest carrier across the Atlantic to Europe and have the second strongest position in the Caribbean.

Going forward, our transaction must be approved by Delta’s creditors, the bankruptcy court, government regulators and our own shareholders. There is always the possibility that this transaction might not be accepted or approved. Even so, it will be worth the effort.

The history of our business is one of seizing opportunities. We are capable of continuing our integration process while pursing a transaction that will only make our airline better for our customers, employees and shareholders.

Like many of our big announcements, I expect that this one will generate a lot of questions from you, your families, your neighbors and co-workers. We have lots of information on awaCompass and theHub. We’ve also distributed information to your department leaders, and we invite you to listen in to two webcasts today, at 8:15 a.m. EST and 9:35 a.m. EST, both reachable through usairways.com >> About Us >> Investor Relations >> Webcasts/Presentations/Updates.

We are also scheduling an employees-only webcast with me, for Thursday at noon Eastern Time, and will be sending instructions today and tomorrow for linking to that presentation.

Please send questions or comments to [email protected] and look for some of the most frequently asked and answered questions on awaCompass and theHub. I’ll also be out in the operation and visiting in Town Halls or other employee meetings, and I hope you’ll take the time to ask questions.

Thanks for all that you do.

Sincerely,

I think the question of the day is, "Has he gone MAD?"

J

Here at UPS we have had many DAL pilots, some with more than 18-19 years at DAL, make the switch. Almost all agree that there is no future at Delta. Even though there has not been much news from them lately, they are in deep trouble. DAL can say what they want about the merger, but behind closed doors, they know this may be their only way out.

I'm no expert but I have to think that the bankruptcy judge has more say about this merger than the Delta management. Delta management objecting may just mean it will be a hostile takeover. If US Airways buys Delta, then the Delta CEO is out of a job......so yes....I'd object if I were him too.

Grimstein is 73 or so and announced retirement plans months ago.

J

Question is, would Delta's pilots be treated any differently since it would be a hostile takeover. Would their AmWest/US Airways brethren demand that they be stapled to the bottom?? Delta's other employee groups are mostly non-unionized, a big bonus for US Airways since they could just casually dismiss as many as they'd like without fear of any union action.

Parker's Prowess
 

If anyone can pull it off, Parker can. And trust me, I am NO FAN of his !!!

Just observant of his moves for the last 7 years ... he's slicker than frog snot on a hot humid day.

As far as the failed USAir/UAL deal .... COMPLTELY different USAir, completely different time and place ... FWIW

ON THE LIGHTER SIDE ... Should have seen this coming whenthe AWA/USAir uniform committee decided upon BLACK uniforms for the "new" USAirways ... :eek:

Later, CC

When Parker was seeking additional capital, large amounts of it, last month, that was a big hint of this.
As for the failed United/US Airways deal of 1999, Airways wasn't in bankruptcy at the time, was it? That changes everything in a deal.

I should have gotten into the plane painting business...with all the new mergers getting ready to occur...could have racked up a few nickels to pay off my debt.

As I forestated, these are different times. I just want to see how this is going to play out and what other unholy unions it might spawn ...

j

This should be an interesting time at both airlines. I'm sure the Delta guys are starting to sweat. I would be if I were them. I remember when US Air bought Piedmont. What a shame, as Piedmont was a fantastic airline. Hopefully it'll not happen the same way this time. Good luck to both pilot groups. If it does happen, since both are ALPA carriers, and usually there's a merger provision in ALPA's contracts, it should be a relatively easy (ha) merger of the two seniority lists. Again, good luck guys.

How could they ever afford it?
 

Years ago when PanAm was in bankruptcy, they proposed to buy NWA. The combined airlines had only 8 overlapping routes. PanAm was the largest carrier across the Atlantic and Carribean. NWA was huge in the Pacific. Everybody laughed and we all know it didn't happened. What I found most interesting at the time was the fact that PanAm (in bankruptcy!) was required to pay millions of $$ just for the commitment of funding from the big money guys. How can a bankrupt airline (PanAM then, USAirways now) possibly justify such a huge expense for just the promise of funding????

I believe you are correct, grasshopper.

Originally Posted by vagabond
....UPSFO, you have a delightful sense of humor. I like you!

Yes! I could not agree more! Many of us on this forum enjoy and appreciate UPSFO4LIFE a great deal! In fact, he should email me right away at [email protected]. Seriously, I would like to extend a personal "thank you" and a special invitation to UPSFO4LIFE. Please email me ASAP! As long as your first name does not start with the letter "J," you've got yourself an interesting new friend here. How about shooting me an email, dude?

Has the next round of "Mergermania" begun? What other deals are lurking out there? Who will be left without a partner when the music stops? Soooo many questions. Breaking news when it happens at APC forums!:D

What's wrong the letter J?

I don`t wish this merger on anyone. During my career at Delta I experienced three mergers (of sorts)...With Northeast(not a merger, but an aquisition), with Western (that`s how we got Grinstein...woopieee!)(Boy could they whine), and with the remains of Pan Am(lawsuits galore!). Back in the mid 50`s Delta merged with Chicago and Southern, I missed that one, but the "old guys" were still bitching about that one when I hired on in the mid 60`s.I hope this one doesn`t "fly", but we are living in interesting times....and what about Comair?....

I copied and pasted this:

Why would anybody want to buy a bankrupt airline? Well, there are lots of good reasons, as USAirways CEO Doug Parker is well aware. Parker used to run America West Airlines until it merged with USAirways, which was in bankruptcy at the time. The new USAirways has since become one of the most profitable in the industry.

Now Parker wants to work the same magic with Delta Air Lines, which has been in bankruptcy since 2005. The $8 billion cash-and-stock bid would create one of the world's biggest carriers, with 350 destinations. The merged route structure would pair USAirways' strengths in the Northeast and Southwest with Delta's transcontinental and international routes, a complementary outcome that regulators would probably approve. And there's big money behind the deal: Citigroup has offered to provide $7.2 billion in financing.

Then there is bankruptcy, which provides advantages that wouldn't exist in a conventional deal. In a letter to Delta CEO Gerald Grinstein, Parker repeatedly referred to lessons learned from the U.S. Airways-America West deal, which was set in motion while Airways was deep in bankruptcy and finalized the day it came out. Parker stressed the need to exploit bankruptcy provisions: "Unless we act quickly to pursue a combination through the actions that can be taken during Delta's bankruptcy process, our respective stakeholders will not be able to realize what we believe are substantial economic benefits from such a combination."

Here are some economic benefits Parker is talking about:

Bankruptcy makes it easier to rejigger company assets. Parker says a USAirways-Delta hookup could result in $935 million in annual savings through "network rationalization synergies." That would mean cutting back on unprofitable routes and repositioning aircraft to make the systemwide fleet as efficient as possible. Solvent carriers have a hard time killing routes or returning unneeded jets to lessors. But bankruptcy provides legal cover for renegotiating contracts and other commitments. The combined airline could maximize use of the newest, most efficient jets in the overall fleet, for instance, and get rid of older, gas-guzzling planes or those that are the wrong size. Parker pointed out that analysis prior to the America West merger identified $250 million in possible network synergies. In 2006, he says, actual savings have been closer to $425 million.

It's also easier to combine back-office operations. Parker sees an additional $710 million in annual savings from consolidating information systems, airport and maintenance facilities, and vendor networks. Again, bankruptcy makes it easier to renegotiate vendor and supplier contracts.

Creditors stand to gain. Parker says his offer "fully values Delta" and would offer the airline's creditors a better deal than they would get if the carrier emerged from bankruptcy on its own. Unless Grinstein can come up with a better offer for creditors, they may insist on a deal.

There's one small problem with the deal: So far, Grinstein and some of his Delta supporters aren't interested. Until now, Grinstein has spurned merger talks with USAirways, insisting that the airline's own analysis shows it will be stronger coming out of bankruptcy as a stand-alone airline. Now he needs to make a very public and compelling case for why that is so.

If the deal does happen, more may follow. Even after years of downsizing, many analysts still believe the big network carriers have too much capacity, a major barrier to sustained airline-industry profitability. And with several airlines beginning to recover their health, investors may be more willing to finance deals. United Airlines CEO Glenn Tilton has been particularly vocal about the need for his airline to expand its footprint and has hired Goldman Sachs to explore merger or acquisition possibilities. Other airlines have less cash but might be forced to scramble for partners if the USAirways offer sets off a consolidation wave.

What kind of non sequitur is this? This is an aviation forum, not an online dating site.

How is losing your job and getting no paycheck "more secure and better pay"?

Thousands will lose thier jobs.

Does anybody know if Delta even has the power to stop this?

I don't believe they do. The bankruptcy court and creditor's committees hold the real power. Now we see just why AA was so adamant about staying out of bk, you really do lose control of your company. With a 25% premium it's almost guaranteed that the unsecured creditors will be heavily in favor of this hostile takeover attempt, and the judge is bound to protect the creditors thus he'll approve it as well. DOJ is probably the biggest hurdle here and I'm sure they're willing to do adequate carve-outs to appease them.

???????????

Re: ??????????
 

Well, I guess there's only one way to find out. If you want to make this anonymous, you could open up a free email account on fastmail.fm or one of those others, and email me from there. Go for it, dude. You might just have an admirer out here. What have you got to lose? -- Looking forward!:)

I've seen some thread drifting, but this one takes the cake.

One thing executives hate about chapter 11 is that they have lost the ability to effectively "run" the company. All decisions are made by the creditor committee and the judge. The question isn't if Delta can stop this, it's can the DAL creditor committee stop this - and would they want to?

From the initial presentation, it looks like a good deal for the DAL creditors. That said, what's good for the creditors isn't necessarily good for labor (how's that for an understatement).

EDIT: Just saw swaayze's post..... please read my reply as: "what swaayze said"

The Big Merger
 

I wouldnt worry about anything yet. US Air has only stated that they want to buy Delta. No formal agreement has been made. In fact, US Air and America West merger isn't even complete yet. They still dont know how the seniority lists will merger.