OK, have you heard about the proposed US Airways-Delta merger? (See below) Rather than create a single-story-line thread, I thought I'd create a place to post all airport & airline articles (and attempt to revive my favorite 80's adjective "Rad"). But let's kick it off with the US Air-Delta news. What could this mean for SLC's Delta hub?
US Airways Proposes $8 Billion Delta Air Takeover (Update8)
By Mary Schlangenstein
Nov. 15 (Bloomberg) -- US Airways Group Inc. made an $8 billion offer for bankrupt Delta Air Lines Inc. in a transaction that would create the world's largest airline.
US Airways disclosed its bid today after Delta Chief Executive Officer Gerald Grinstein last month declined to enter into talks. Delta's creditors would get $4 billion in cash and $4 billion in stock in US Airways, formed 14 months ago by exiting bankruptcy in a merger with America West Holdings Corp.
A merger would vault the combined company past AMR Corp.'s American Airlines as the world's biggest carrier, uniting the third-largest U.S. carrier, Delta, with seventh-biggest US Airways. The tie-up would take advantage of airlines' recovery from more than $40 billion in losses from 2001 through 2005.
``This would be a very sensible move, but fiendishly complicated,'' said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia-based consultant. ``Complicated by issues of seniority, culture, fleet, route networks -- and that's just scratching the surface.''
Shares of US Airways rose $4.63, or 9.1 percent, to $55.56 at 9:51 a.m. in New York Stock Exchange composite trading. Delta's 7.9 percent notes maturing in 2009 surged 11.75 cents to 52.25 cents on the dollar, according to Trace, the bond price reporting system of the NASD. The yield fell to 33.8 percent.
Bankruptcy Exit
Grinstein, 74, responded to US Airways' initial offer in an Oct. 17 letter, telling US Airways CEO Doug Parker, 45, ``it would not be productive.'' Delta's creditors endorsed that view, Grinstein wrote in the letter, which was contained in a federal filing. In a statement today, Grinstein said Delta would review US Airways' proposal.
``Delta's plan has always been to emerge from bankruptcy in the first half of 2007 as a strong, stand-alone carrier,'' Grinstein said. Since filing for Chapter 11 in September 2005, the third-largest U.S. carrier has cut unprofitable flights, reduced labor costs and shed aircraft.
Citigroup Inc. has committed $7.2 billion in financing for the proposed merger, US Airways said. Delta's unsecured creditors would own 45 percent of the combined company, which would operate under the Delta name.
US Airways said a merger would provide $1.65 billion in annual cost savings for the two companies.
The combined company would be ``a more effective and profitable competitor in the current fragmented marketplace,'' Parker said. The merger eventually would boost earnings per share by 40 percent at Tempe, Arizona-based US Airways, Parker said in a conference call.
Route Strengths
The merger would help heal a troubled U.S. airline industry, said Vaughn Cordle, chief executive of the consulting firm Airline Forecasts in Clifton, Virginia. The major carriers haven't done enough to sustain themselves in the long run, Cordle said.
``With all the major restructuring that occurred, the big network airlines have way too much leverage,'' Cordle said in an interview. ``There's no way they can earn their way back to a healthy balance sheet before this cycle.''
US Airways and Delta both have strong route networks on the U.S. East Coast, while US Airways also has a strong West Coast presence. Delta has been building its international system, adding more than 70 new routes since 2005.
Delta has major airport operations in Atlanta, Cincinnati, Salt Lake City and New York, while US Airways has hubs in Phoenix, Philadelphia and Charlotte, North Carolina.
``We can put the two networks together and optimize them,'' Parker said in an interview. ``As we do that, we can actually fly to 100 percent of the cities we serve today with two networks, with 10 percent fewer airplanes. That's a lot of savings.''
Separately today, British Airways Plc, Europe's third biggest airline, said it bought AMR's 1 percent stake in Iberia Lineas Aereas de Espana SA to maintain its two seats on the company's board.
To contact the reporter on this story: Mary Schlangenstein in Dallas at
maryc.s@bloomberg.net
Last Updated: November 15, 2006 09:57 EST