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 compete.

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.

FMI: www.delta.com, www.usairways.com