US Airways proposes merger with Delta...

[Nonstop2AUH]

Details of proposal at following link....


http://www.usairways.com/awa/content/op ... fault.aspx (http://www.usairways.com/awa/content/operations/merger/default.aspx)


On CNBC Mike Boyd says it's a purely financial deal, only good for stockholders and bankers, bad for consumers (i.e. higher prices/less service) and bad for employees (i.e. layoffs) regardless of what Parker says. They also spoke to analyst Ray Neidl, who was noncommital about whether or not he liked the deal but who agreed the cost savings were compelling, and then they got Doug Parker on the phone who more or less stated that they have a formula for combining airlines to realize synergies (this is the kind of talk investment bankers love and employees hate) and he saw no reason why a Delta merger wouldn't be as successful as AW/US Air. He said Delta had not yet responded but had basically turned down an earlier approach some months ago. What's obvious is some hubs would have to go (or be severly cut back, especially Charlotte) for this to work and if they are going to realize the kind of cost savings they are talking about, employees should start sending out resumes now...

[Art at ISP]

This whole thing doesn't sound right. It may be a ploy to run the stock up for some reason.

I still think the most sense would be for US to buy Northwest--or what's left of Northwest. There are aircraft synergies, hubs which don't overlap badly (except perhaps MEM), and the SHARES reservation system which US uses is based on Worldspan, which NW uses.

I think something else is up here--we're just not seeing it yet.

[RDU-JFK]

It would never happen, but if it did, I would hate to see Charlotte hub go :(

[hiss srq]

I truely hope that we do not do this. Without that mess of an airline we really are looking at amazing things on the horizon as it is. Do not do it Doug!

[Matt Molnar]

This whole thing doesn't sound right. It may be a ploy to run the stock up for some reason.

Agreed. Sure enough, all the airlines have had major spikes today...

As of 11am:
US (LCC) +13.2%
Delta (DALRQ) +8.2%
Northwest (NWACQ) +10.5%
Continental (CAL) +7.2%
JetBlue (JBLU) +6.9%
Alaska (ALK) +5.3%
Hawaiian (HA) +5.1%
American (AMR) +4.7%
Southwest (LUV) +3.2%

[Ari707]

The Merger with America West seemed to be a great fit, very few overlaping routes, similar fleets. US and DL, have tons of overlap, especally in the southeast, US is Airbus based, while DL is boeing
based. and would they really need hubs and major citys in Boston, LGA, JFK, PHL, CLT, and ATL???

And which shuttle do they sell????

[Ari707]

http://images.delta.com.edgesuite.net/d ... 082704.pdf (http://images.delta.com.edgesuite.net/delta/pdfs/debt_ref_082704.pdf) found this while looking at DL site,

[RDU-JFK]

So let's say by some miracle Delta agrees to this merger and the regulators by another miracle approve this. We'd have the following Hubs/foci:
Las Vegas, Phoenix, Salt Lake City, Cincinnati, JFK, Philly, Charlotte and Atlanta, with focus cities in LGA, DCA, BOS, and PIT.

Which would they keep? Well there's still a gaping hole in the Midwest but US is fine with that now. I would keep PHX, LAS, PHL, and ATL as hubs, and reinforce LGA, CVG and CLT as domestic/regional focus cities. JFK would be an international focus city. Your thoughts?

[nwafan20]

Serisouly, Parker needs to give it up. First America West, now DL? He is like a horny teenage kid, out looking for sex!

[LGA777]

NWAFAN20, very intelligent reply. Doug Parker is a true visionary in this industry you seem to know so much about. As an employee of DP's, today's news could mean many pluses and negatives in my future career, and it probably has less chance of approval than it does, but unless you know much about Mr Parker, you should think twice about describing this aviation genius like that publically. And BTW I don't know many horny teenagers who put together EIGHT BILLION DOLLAR Deals !!

Respectfully

LGA777

[nwafan20]

I'm sorry if you find my knowledge of the aviation field not adequate, I do my best with my own personal knowledge.

I apologize if I have offended you but from what I have seen with what he has done with US Airways I don't have much respect for the man. (again, No offense) I would hardly call him an "aviation genius"

But in all seriousness, how many airlines does he want to merge with? DL/US isn't a very good fit...

[LGA777]

Thanks NWAFAN20, very fair response, I appreciate it. We have different views on what he has done at US, and I am glad we live in a world we can express different views, that's the way it should be. As far as the genius thing I think History will determine who is right, and I think 50 years from now he will be up there with the best of this era, but time will tell.

LGA777

[PHL Approach]

I could not agree with you anymore Ron. Mr Parker knows what he is doing, he is a true business savvy genius. Or else he wouldn't even dream of putting up a bid for Delta if he didn't think it could work. If this goes through which I have high hopes that would mean he's spawned two sinking airlines into successful green making entities. I think the fleet advantages from getting DAL are tremendous, he would be able to offer many routes for the main thing he is really into offering which would be Trans-Atlantic service, possibly Trans-Pacific out of PHX. Who knows...

[Nonstop2AUH]

For full disclosure, I've never worked in the airline business, but I have worked on Wall Street for 8 years, which is long enough to understand why this sort of deal is compelling to the Street in almost any industry.

You start with the theory that there are too many airlines in America (or banks, or restaurants, or widget makers, etc.) and, obviously not all will be successful long term. You then assert that since consolidation is inevitable, you want to back a winner so you line up some financing to actually instigate the consolidation with a merger bid. Bankers, lawyers, auditors all get paid nice fees, mostly up front. There's alot of talk about synergy and efficiency. The stocks start to run as investors speculate about other bids and such.

You then go to regulators with the story that the deal is not really about consolidation, it's in the spirit of competition, and that it would be protectionist/reactionary/socialist etc. to block a deal that would create a stronger, more efficient industry for consumers - of course at the same time you conveniently don't mention the layoffs, service cutbacks and higher prices needed to realize the synergies. If they don't approve the deal, things go back to status quo except that bankers, lawyers and auditors made some very nice fees along the way and maybe Manhattan condo prices go up. If they do approve the deal, the bankers, lawyers and auditors get even bigger fees, and the management teams get a nice payout for themselves, might even exit the scene having engineered the deal, but in any event, it almost always ends up falling to the employees - who never asked for this - to deliver to the shareholders the synergies that management promised and was so excited about.

Basically, you can't create value out of thin air, 1 + 1 doesn't equal 3 except in Wall Street powerpoint presentations. Behind the fancy graphics and vocabulary, the only way real value is created in this sort of thing is by cutting jobs, compensation and service while charging the consumer higher prices. Just my 2 cents as a former Wall Streeter, but if someone knows of an airline merger of this size that enhanced shareholder value while also being favorable to consumers and labor, I'd love to hear about it.

[Nonstop2AUH]

Having re-read the thread we have some comments from US Airways employees or at least Doug Parker fans, any thoughts today from Delta people if there are any here? Seems like management is quite certain they can get out of bankruptcy on their own, but as is pointed out on the A.net thread, it's really the DL creditors (i.e. Boeing and some financial institutions) who get to decide whether to take the offer or give it a go. It seems to be really about Doug Parker and Citigroup's money vs. what the DL creditors want. Is this all being taken as a serious offer internally, and are DL employees worried?

[Mellyrose]

http://www.nytimes.com/2006/11/15/busin ... r=homepage (http://www.nytimes.com/2006/11/15/business/15cnd-delta.html?hp&ex=1163653200&en=c8e066c7e69264a0&ei=5094&partner=homepage)


November 15, 2006
US Airways Bids $8 Billion for Delta

By JEREMY W. PETERS
US Airways offered today to acquire Delta Air Lines, now under bankruptcy-court protection, for $8 billion.

The combined company would carry more passengers each year than any other airline in the world, eclipsing American Airlines, the current leader.

The offer, extended to Delta’s bankruptcy lenders, is an attempt by the chief executive of US Airways, W. Douglas Parker, to circumvent Delta’s top management, who rebuffed two earlier approaches from Mr. Parker about merging the two airlines.

In a letter today addressed to Delta’s chief executive, Gerald Grinstein, Mr. Parker said he was disappointed that the two executives could not reach an agreement.

US Airways said today that it is offering $4 billion in cash, plus US Airways stock that was valued at $4 billion at the close on Tuesday. That price would represent a substantial premium for Delta’s creditors over what the airline’s unsecured debts now trade for. The creditors would own about 45 percent of the combined company.

Today, shares of US Airways jumped $8.57, or 16.8 percent, to close at $59.50 on the New York Stock Exchange. Other airline stocks including Continental and Airtran Holdings also rose.

A Delta-US Airways merger would further consolidate an industry that has already shrunk considerably — and painfully — over the past five years. Rising oil prices, plummeting profits, a wave of bankruptcies and disruptive labor strife have roiled the nation’s airlines since the Sept. 11 attacks. And as the old-line carriers have struggled to cope with an onslaught from low-fare airlines like JetBlue and Southwest, analysts have predicted that there would be fewer airlines flying over American skies by the end of the decade.

US Airways said the merger would save at least $1.65 billion in operating costs each year by combining facilities at some airports, eliminating overlapping flights and cutting capacity by about 10 percent.

Mr. Parker said in a conference call with analysts and reporters this morning that the figure could be even greater. “This is not value that either of our companies could create independently,” he said. “This only happens when the companies get together, and that’s why this is so important.”

Mr. Parker contacted Mr. Grinstein this spring to suggest a merger, but Mr. Grinstein resisted the idea. At the time, he said he felt that Delta preferred to reorganize and emerge from bankruptcy on its own, according to reports. Mr. Parker said he tried again in September, but was once again rebuffed.

“I was disappointed that you declined to meet or even enter into discussions in your letter of October 17, 2006,” Mr. Parker said a letter to Mr. Grinstein, dated today, that was included in the news release announcing the proposed acquisition. “Because the benefits of a merger of US Airways and Delta are so compelling to both of our companies’ stakeholders, we believe it is important to inform them about our proposal.”

Today, Mr. Grinstein again dismissed the idea of a merger. “Delta’s plan has always been to emerge from bankruptcy in the first half of 2007 as a strong, stand-alone carrier,” he wrote in a statement posted on Delta’s Website. “Our plan is working, and we are proud of the progress Delta people are making to achieve this objective.”

Under the terms of the deal that US Airway proposed today, the new airline would adopt the Delta name, with Mr. Parker as chief executive leading a combined management team. Nothing was said about a role for Mr. Grinstein.

Many analysts have been saying for years that the United States airline industry suffers from overcapacity. Several of the largest carriers have touched down in bankruptcy court in recent years, with Delta and Northwest Airlines seeking protection on the same day last year. US Airways itself has filed for bankruptcy protection twice.

As recently as a few years ago, some analysts thought US Airways’ days were numbered, given its high costs and dependence on short-hop routes in the East. The idea that it might someday be in a position to acquire two other airlines was unthinkable then.

But since its emergence from bankruptcy last year, US Airways has undergone a stunning reversal of fortune. It merged with America West in a partnership that greatly extended its domestic reach, and shares of the combined company have risen sharply since then.

The widespread expectation in the industry had been that Delta would find a merger partner after emerging from bankruptcy, not before, and that the airlines it has relationships with now, most notably Northwest and Continental, would be the most likely partners.

US Airways said its offer would yield more value for Delta’s unsecured creditors than Delta could deliver by reorganizing on its own. Delta’s unsecured debt has recently traded at 40 cents on the dollar, US Airways said.

Last year, Delta flew approximately 86 million passengers globally, according to the International Air Transport Association, about 12 million fewer passengers than American. US Airways flew about 37 million passengers.

Both airlines have had problems in recent years with their labor unions, principally the Air Line Pilots’ Association, whose resistance to pay cuts and other concessions was an important factor in forcing Delta into bankruptcy. And both have struggled to cope with low-price competitors like JetBlue and Southwest.

Mr. Parker said he was confident that the merger would be satisfactory to the various labor unions at each airline. He said that when it came to eliminating jobs, US Airways would prefer to do so by leaving vacant positions unfilled rather than through layoffs, he said.

Mr. Parker said he was confident that the proposed combination would pass muster under antitrust laws, though US Airways and Delta are the operators of the two rival shuttle services in the intensely competitive Boston-New York-Washington corridor. Mr. Parker suggested that the combined airline could simply sell one of the shuttle operations to satisfy regulators. “There are no antitrust issues that can’t be resolved,” he said.

Analysts said that a merger between Delta and US Airways could result in a leaner, more efficient airline. “Even though airline mergers tend to be messy while employees, cultures and fleet types are integrated,” said Ray Neidl, an analyst with Calyon Securities, “in the long term a merged carrier should benefit in synergies from revenue generation, the ability to cut overhead costs, and the probability that marginal hubs would be closed.”

Micheline Maynard and Peter Edmonston contributed reporting.

[hiss srq]

I hope this does not happen. Our boss is a major genius in te industry but I do not want tosee us merge with Delta nor take the Delta brand I personally find pride in the fact that I make US fly and I do not want to have to live by some delta slogan. This will not happen is the consensus right now among us airways employees and I do not think Delta employees want it either.

[T-Bird76]

I'm sorry if you find my knowledge of the aviation field not adequate, I do my best with my own personal knowledge.

I apologize if I have offended you but from what I have seen with what he has done with US Airways I don't have much respect for the man. (again, No offense) I would hardly call him an "aviation genius"

But in all seriousness, how many airlines does he want to merge with? DL/US isn't a very good fit...

Could you expand on your statement? I think the man deserves a huge amount of respect. You seem to think he hasn't done allot for US, well for starters he keep US in business. If it wasn't for HP coming along like the white knight there would be lots of US birds in storage right now.

There's more to this then meets the eye, US hasn't really said all to much about this. They can do allot if they take over Delta, keep their ops, dump their ops or keep what they want for US. We'll see how this pans out but look to Airbus again to put up some major bucks like they did with the US buy out. This would assure Airbus of having the biggest airline in the world as their customer... Interesting isn't?

[nwafan20]

Well for starters, post-9/11 US has been in 2 CH. 11's, nearly liquidated, and had Airbus bail them out.

HP saved US Airways from ANOTHER Ch. 11 by merging with them, which I didn't like, HP was a fine airline, IMO, US Airways isn't..


I have flown US on several occasions, I hate it. All the employees I have ran into were rude, their planes dirty, and are gearing towards an all bus fleet.

He hasn't handled the HP/US merger very well, even after all this time, the airlines still havn't merged totally together.

[T-Bird76]

Well for starters, post-9/11 US has been in 2 CH. 11's, nearly liquidated, and had Airbus bail them out.

HP saved US Airways from ANOTHER Ch. 11 by merging with them, which I didn't like, HP was a fine airline, IMO, US Airways isn't..


I have flown US on several occasions, I hate it. All the employees I have ran into were rude, their planes dirty, and are gearing towards an all bus fleet.

He hasn't handled the HP/US merger very well, even after all this time, the airlines still havn't merged totally together.

After all this time??? It took AA and TWA two years to merge fully and there are still signs of TWA at AA. You still haven't provided any facts to back up your statement about how Parker hasn't handled the merger correctly? Big deal they are going towards and all Airbus fleet, if that works for them so be it. Facts are important when it comes to making statements.

[LGA777]

[quote="nwafan20"]
I have flown US on several occasions, I hate it. All the employees I have ran into were rude, their planes dirty, and are gearing towards an all bus fleet.

Well nwafan20, I am sorry to hear about your bad experiences flying US and I am sorry you hate US so much but the experience you describe reminds me a lot of my experiences with your beloved NW. The all Airbus fleet you dislike so much sure beats that mostly 30-40 year old DC-9 fleet at NW. And although I normally fly US as an employee in the 40 or so flights I have taken in the last two years I did not witness the dirty aircraft or rude employees you encountered, I guess you had bad luck and I am sorry that happened to you. I hope one of these days you can try US again and have a positive experience like many do, I would love to see you become a US fan instead !

LGA777

[Bellucciman]

Pretty good debate going on here! My company was merged in 2003. Konica/Minolta.... I was part of the Konica end of the business. We purchased 55% and had the "upperhand" but my division (photo) was controlled by the Minolta group. And three years later we're out of business. Luckilly I was able to transfer to our medical imaging division (I miss my mini lab equipment though!).

The parent company shut down the worldwide photo imaging business. My feeling was the poor management of the Minolta half combined with a ton of their debt and lousey digital camera products was a massive factor. Plus the state of the photo industry as a whole was and still is terrible.

I don't know which of these two airlines would benefit from such a merger. I've flown both airlines and I think both have an equally good fleet (I tend to favor the Boeing jets more than the Airbus jets). I guess only time will tell if the merger happens. Should be an interesting ride though.

[T-Bird76]

I don't know which of these two airlines would benefit from such a merger. I've flown both airlines and I think both have an equally good fleet (I tend to favor the Boeing jets more than the Airbus jets). I guess only time will tell if the merger happens. Should be an interesting ride though.

The only ones who will benefit will be the lawyers, stockholders, high priced consultants, and upper management who will be given huge golden parachutes.

[Nonstop2AUH]

Amen to that. And those bankers and lawyers and such rarely (if ever) have to fly economy class like most of the customers, or worry about their next paycheck like most of the employees. I don't want to spark a debate about whether or not America is becoming a 2-class society, but it's evident that Wall Street and management generally does whatever's best for Wall Street and management. I well understand the economic benefits to the shareholders of US and creditors of DL of the proposed deal, but it's sad that labor and the traveling public have little or no leverage here. Never thought I'd say it, but I'd rather see the government loosen up the foreign ownership laws to promote investment and growth of the industry than see more consolidation and job losses. I imagine DL would be an interesting investment for foreign carriers (or investors) if the laws didn't restrict it. Oddly enough, Citigroup who is financing the US bid has many large foreign shareholders, including a Saudi prince, so in the era of globalization it all seems a matter of semantics...

[hiss srq]

The talk of work today was this proposed merger and I find along with myself the vast amount of my co workers do not wantr this to happen. The plus. Our stock jumped a huge amount today. I am deep in prayer this does not go through. Right now we are entering an exciting and promiseing era for our airline and I am afraid that will die off if we merge with Delta. Fleet commonality is another thing you have to look at. It would make no sense at all.

[nwafan20]

The point with the HP/US merger, take it one step at a time, finish the first merger first before you start going after others.

Well, most people I post with on other boards don't like US either. The Airbus thing is a personal preference.

Evidence? What about how he ran US into 2 CH. 11's and nearly liquidated them. Isn't that enough evidence of a failed CEO?

I'm sorry to hear about your bad experience with NW, I have never had any problem with them, quite the contrary, I have nothing but good things to say about them. I would take a DC-9 over a bus any day, and US still has several old 737's. NW has investigated and determined that they can run the Dc-9's cheaper than buying a new aircraft even at current fuel prices.

[hiss srq]

Well first off facts might want to be corrected Parker was not our CEO during the time frame that we were in Ch. 11 Wolf was and he is gone number one. Number two we bust our asses for our customers excuse my french moderators that be. We work hard for our clients and you are not taking into account the new USAirways sir. I have too flown Northwest and their F/A's were more stuck up than bill gates in the hood. Plus the obvious management issues in that airline which are far worse than any our airline faces and for crying out loud your pilots wont come back to work for you. We are getting over 70% of our pilots who were called back to report in is the statistic I have been given. Do not throw stones at Airways when your stones are hollow please.

[T-Bird76]

The point with the HP/US merger, take it one step at a time, finish the first merger first before you start going after others.

Well, most people I post with on other boards don't like US either. The Airbus thing is a personal preference.

Evidence? What about how he ran US into 2 CH. 11's and nearly liquidated them. Isn't that enough evidence of a failed CEO?

I'm sorry to hear about your bad experience with NW, I have never had any problem with them, quite the contrary, I have nothing but good things to say about them. I would take a DC-9 over a bus any day, and US still has several old 737's. NW has investigated and determined that they can run the Dc-9's cheaper than buying a new aircraft even at current fuel prices.

Are you freaking kidding me??? Parker never ran US before he bought them?? Where did you get that he ran US into Chap 11 twice?? Get your facts straight. NWA was smart keeping the 9s when oil was cheap but now they are costing them a mint to run. btw NWA was recently rated last in customer service by JD Power.

[LGA777]

Mr NWAFAN20 you are really testing my patience with things you think you know a lot about but are proving to this board you know little. US had two Chap 11's and was on the verge of collapse, we came so close to liquidation and many gave us up for dead. All under the old East management. It was Doug Parker CEO of HP who had the visionary to convince investors to purchase US (without using HP's money) and for regulators to approve the merger. LESS THAN A YEAR AFTER THIS US/HP MERGER US's 1st QUARTER PROFIT WAS ONE OF THE LARGEST FOR THAT QUARTER OF ALL THE WORLDS AIRLINES. If that is not visionary or genius, then please tell me what is ? Oh and BTW many of his employees have tremendous respect for him. When was the last time that happened at NW ?

LGA777