Wednesday, November 15, 2006

US Airways Makes a Bid for Delta

This is the strangest news in a while from a very strange industry.

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.
Let's see. US Airways doesn't have it and Delta isn't worth it. Other than that, a lovely idea. I would expect Delta creditors to leap at the offer and US Airways stockholders to pocket these gains (which I cannot really explain) and run.


Nikki said...

I would question US Airways motives and not give them the benefit of the doubt. More routes, hubs, planes and pilots give you a wider foundation to make any type of business move in the future...even though a negative and a negative adds up to a...negative, perhaps this opens up some escape hatches down the road if oil prices keep coming down and it can t hurt to be bigger in terms of pricing and negotiating airport deals...From a personal perspective, as a frequent user of all the major airlines running from tennis tournament to tennis tournament, I find that Delta, like Continental, American, Unitted and Jet Blue, tries most times to run a professional operation even though there are delays, attitudes...US Airways on the other hand barely qualifies as a member of the service industry category. Flights cancelled with no notice, bags lost en masse, empty airports with no personnel are par for the US Airways system. I see this consistently as if just not sending a plane becomes the solution if only 70% of seats have been sold. I know that if I ever have to go US Airways...better Fed Ex anything that I will need at my destination or back when I get home in the next 10 years. Sad day because Delta really has top pilots and the fly delta jets in atlanta makes you feel part of the right stuff.

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