Sat, Nov 18, 2006
Jittery CEO Presses Restructuring Plan Over Offer
A report in the Wall
Street Journal says Delta is seeking support from its creditors to
avoid US Airways Group's (USAG) $8 billion merger bid.
Delta executives reacted negatively to USAG's proposal which
includes $4 billion in cash and 78.5 million in stocks. Those same
executives are understandably nervous as USAG's offer is 40% above
the current average trading price for Delta's unsecured claims.
Delta's CEO has said the airline will emerge from bankruptcy as
a stand-alone company, but WSJ's report says he and other
executives held a series of conference calls with the airline's
creditors attempting to forestall a decision to sell.
USAG has made the pot a very sweet one to ignore. It claims the
merged airlines could save $1.65 billion annually mainly by
eliminating duplicated effort in those markets where the pair now
Meanwhile, USAG seeks a meeting with those same creditors via
Delta's official creditors committee -- that meeting could come as
early as next week.
The announced offer has set off a flurry of media activity and
speculation on how the markets and customers might react. Reuters
believes a merger might lead to more labor problems. Indeed, USAG
is dealing with a possible strike of its pilots union -- they are
picketing at several locations in protest of USAG's reluctance to
negotiate wage increases.
Some outlets have speculated that the merger will hurt
competition and will likely trigger a challenge by the SEC. USAG's
response is the merged airlines would control only 18% of the
domestic market and will still face competition at most of its
hubs. Moreover, it says, all but 19% of its customers would have
access to low-cost carriers.
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