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Old Posted Nov 15, 2006, 8:24 PM
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The Super-Rad Airports/Airlines Thread

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
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Old Posted Nov 15, 2006, 8:28 PM
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I caught the CNN report on this during lunch. Apparantly this is a pretty big deal. Experts were saying that this would likely be a beginning of a hostile takeover.
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Old Posted Nov 15, 2006, 8:35 PM
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If this happens, you can say bye-bye to a hub. It would make little sense for US Airways to have a hub in both Salt Lake and Phoenix and I doubt they'd drop the Phoenix hub for the Salt Lake one.
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Old Posted Nov 15, 2006, 8:45 PM
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I'd imagine exactly what Comrade just said. If USAir buys Delta, I'd think SLC will be left hub-less, though obviously with a still-large Delta presence.

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Old Posted Nov 15, 2006, 11:40 PM
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The only problem is how close the hubs would be.


South- ATL-CLT


After the merger the hub structure would probably look like this.

Major hubs- ATL, PHX, PHL
Major Focus Cities- SLC, LV, CVG

With how dominate ATL is in the south CTL would be out of the picture.
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Old Posted Nov 16, 2006, 12:13 AM
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Delta has stated pretty much No to the deal. And anyone remember the United/US Airways merger and what happend to it? Delta and US have vastly different fleet plans, and vastly different buisness plans. US has stated it is an LCC, whil Delta is still a full blown Legacy. US currently is shifting to an Airbus fleet (only airline in the US that owns A33x aircraft) while Delta is a 100% Boeing fleet. Delta is arguably much larger, more known too. And with hubs so close doesn't make too much sence. The Wall Street Journal stated it was most likely just an attempt to see if Delta is willing to merge... As for a hostile merger, you need a lot of capital, cash capital to do that look up the Qwest/US West telecom merger (an amazing feet of hostile goodness).

US Airways is a part of the Star Alliance, how do you think the larger than US United would feel? It would be very hiliarious however if tomorrow UAL announced merger plans with US Airways agian, or Delta!
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Old Posted Nov 16, 2006, 12:14 AM
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^ It might not matter if US Airways is planning on a hostile takeover, which by the nature of their bid seems quite possible.

US Airways and Delta are an awful couple together, so much hub overlap. I agree that if this happens, SLC as a hub is a goner, down to focus city or even worse. I actually think CLT (Charlotte) has a lot more to worry about than SLC though being so close to the ATL superhub. Either way, when the weather's right, SLC and the Airport authority better get prepared to go on the warpath to woo over another airline to establish a western hub. JetBlue or Continental perhaps? Operating out of SLC is fairly cheap for an airline, plus with a rapidly growing population and next to perfect geographic location for interwestern travel, I can't see how SLC can't be a hub for some airline.
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Old Posted Nov 16, 2006, 12:56 AM
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Old Posted Nov 16, 2006, 3:53 AM
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Yep the super airport factor has haunted SLC since the construction of DIA, if Delta goes under or is merged, it can spell the end for SLC. (I still am going with airline experts that say a United/Delta merger is still more likely to happen.
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Old Posted Nov 16, 2006, 4:04 AM
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I hope this doesn't go through ... if it does, it sounds like BAD news for SLC airport.

I'm certain we'd love hub status, not our neighbors.
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Old Posted Nov 16, 2006, 5:37 AM
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...its not going to happen, dont worry
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Old Posted Nov 16, 2006, 6:11 AM
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*Nose held high in the Air*

"Heck, You know when we moved to SLC we moved here to feel a certain way. And that airport just doesn't seem to fit the SLC planning module. I really think its time for SLC to re-evaluate their planning process."
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Old Posted Nov 16, 2006, 8:26 AM
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Ultimately, this probably won't go through because of SEC and congress pressure. The overlap of routes will elimate too much competion and the new airline would have about 10% more marketshare than any other carrier. The leaders of the House (I think) Transportation Committee was on CNBC today and did not see to enthusiastic about the deal. Right now, however, the investment institutions have the reasorces and are probably really pushing it and who knows how much power they actually have...not enough to get through a democratic congress, I think. Delta not wanting any part of the deal makes things harder as well. I don't know what US Air's financial situation is like, but given the industry, I would think they would need some LBO action... considerably more risky for the banks.

That being said, I think you will see more mergers like the American West - US Air one. They make sense and will help the industry. No real growth in the large airlines until the number of passengers catches up to supply and supply will not change without a large merger like this one or one of the airlines liquidating.

My $.02.
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Old Posted Nov 16, 2006, 2:04 PM
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Can 2 airlines mesh?

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Would a Delta deal affect Salt Lake?

US Airways' $8B bid stirs speculation about consolidation

By Harry R. Weber
Associated Press and
By Doug Smeath
Deseret Morning News

US Airways made a hostile $8 billion bid for Delta Air Lines on Wednesday, ignoring Delta's repeated statements that it isn't interested in a merger.

Photo by:Keith Johnson, Deseret Morning News
A Delta employee works among planes at Salt Lake International Wednesday. A US Airways spokesman says the airline's hostile bid for Delta wouldn't hurt the S.L. hub.

And although the move could start a stampede of competing bids in a long-predicted industry consolidation, a US Airways spokesman said it is not expected to put Salt Lake City's Delta hub at risk.
When US Airways merged with America West in September 2005, the company took on America West's Phoenix hub. But US Airways spokesman Philip Gee said that hub's proximity to Salt Lake City International Airport would not be a problem.
"A Phoenix and a Salt Lake hub can run very complementary to each other," Gee said. He said Phoenix would be considered a hub for connections in the Southwest, and Salt Lake would serve flights that would be more conveniently routed through the Intermountain West.
In addition to Phoenix, US Airways has hubs in Philadelphia and Charlotte, N.C. Delta's other hubs are in Cincinnati and Atlanta, the latter also serving as the airline's headquarters.
Gee also said the company has no plans to change staffing levels, so a merger would not impact employment at the Salt Lake airport. Rather, he said, a merger would open more flight routes to Utah customers. US Airways currently operates seven flights a day from Salt Lake to Phoenix and two a day from Salt Lake to Las Vegas.
Salt Lake airport spokeswoman Barbara Gann said the airport had no comment on the proposed merger.
Gov. Jon Huntsman Jr. told KSL-TV that he received a call from US Airways executives Wednesday morning.
"It was mostly a calming gesture," he said, "and that is, 'We know you're going to be reading about this, but we want you to know that if everything works out and this transaction goes through, that we fully anticipate that things will remain as they are."'
Proposals and impacts
A US Airways-Delta combination is far from a done deal. Analysts said United Airlines' parent company may make its own move to acquire Delta, and takeover bids for Northwest Airlines, which like Delta is being reorganized in bankruptcy court, can't be ruled out.
They also questioned whether US Airways could complete its plan to create the nation's largest carrier, even after a planned 10 percent cut in capacity, on the compacted timeline it is seeking.
"My main question mark is if the politicians and regulators would allow it to happen, because if it did it would probably set off a trend for industry consolidation," Ray Neidl, an airline analyst with Calyon Securities in New York, said of a Delta-US Airways combination.
A US Airways-Delta merger would create a company with about $28 billion in annual revenue, leapfrogging it past the current No. 1 U.S. carrier, American Airlines. The projection is based on revenue figures through the first nine months of 2006. It's unclear how any divestitures would affect a combined Delta-US Airways' revenue.
It also could lead to higher ticket prices for passengers, industry experts said. "With a capacity reduction of 10 percent, fares are going nowhere but up," said Robert W. Mann, an airline consultant based in Port Washington, N.Y.
Rep. James Oberstar, D-Minn., who is set to become chairman of the House Transportation Committee, said he is concerned the combination would reduce competition and increase costs for travelers.
"If the Justice Department on its own does not initiate an antitrust review, I would ask them to do that," he said.

Reorganizing Delta
Delta said its goal remains to be a stand-alone company when it emerges from bankruptcy and that it had the backing of its creditors committee when it declined earlier discussions with US Airways. It has yet to file its own plan of reorganization, but has the exclusive right to do so until Feb. 15.
If the deal is completed, the combined airline would operate under the Delta name and serve more than 350 destinations across five continents. The combined company would divest certain assets, including one of the two hourly shuttle services that Delta and US Airways operate between Boston, New York and Washington. US Airways has not decided where the combined company would be based.
Officials at St. George-based SkyWest Inc. said Wednesday they expect their existing contracts with Delta to remain in force.
SkyWest has two subsidiaries — St. George-based SkyWest Airlines and Atlanta-based ASA, which SkyWest bought from Delta for $425 million in 2005. SkyWest Airlines operates as United Express and Delta Connection carriers, and ASA operates as a Delta Connection carrier.
Mike Kraupp, SkyWest Inc. vice president of finance and assistant treasurer, said Wednesday that the company's contracts with Delta have been approved by the bankruptcy court and are meant to survive Delta's bankruptcy.
"We would anticipate that, even if Delta were to merge — and that's a big 'if' — that our contract is a valid, existing contract," Kraupp said.
He said any other carrier that acquired Delta probably would continue to honor those SkyWest pacts. "We think we would be in sort of a 'business as usual' kind of event."
Kraupp also downplayed one analyst's downgrade Wednesday of SkyWest stock. In a note, the analyst said a Delta merger could lead to less business for SkyWest.
"I think there are many different pieces ... of this transaction that need to be investigated," Kraupp said. "As we discuss it with analysts, I think their posture is, because of the unknowns associated with it, they're raising questions and saying, 'Could there be future ramifications?'... I don't think they've formed final, definitive conclusions."

Shares and creditors
As it stands now, Delta's existing common shares are likely to end up worthless when it exits bankruptcy. In most bankruptcy cases, debtholders end up with new shares of the company. That's where the US Airways offer comes in: It is proposing to pay Delta's unsecured creditors $4 billion in cash and 78.5 million shares of US Airways stock after Delta emerges from bankruptcy.
Shares of US Airways Group Inc. rose $8.57, or 16.83 percent, to $59.50 Wednesday on the New York Stock Exchange. Delta Air Lines Inc. shares are traded over the counter.
Doug Parker, chief executive of US Airways, based in Tempe, Ariz., said in an interview he believes Delta's creditors ultimately will see that his offer is fair. "The (bankruptcy) process is designed so that the creditors get the highest possible value for their clients," he said.
Parker said he would anticipate flying with 10 percent fewer planes, but "the plan is not predicated on any job cuts" for the 85,000 employees at the two companies.
Delta Chief Executive Gerald Grinstein said last month he had received "feelers" from UAL Corp.'s United Airlines about a possible merger 18 months ago but quickly rejected them. And he said in a statement Wednesday that "Delta's plan has always been to emerge from bankruptcy in the first half of 2007 as a strong, standalone carrier."
In a memo later to employees, Grinstein was more firm, saying "while Delta is obligated to review this proposal carefully, we remain skeptical that it would make sense to deviate from our plan."
Delta spokesman Anthony Black said the Atlanta airline had no comment beyond the Grinstein's statements.
UAL, based in Elk Grove Village, Ill., sidestepped questions about its intentions but didn't rule out another possible bid.
"We think consolidation is good for the industry," said Jake Brace, chief financial officer, when asked about its plans at a Citigroup investment conference in New York. "If it makes sense for us to participate in it, we will."
One analyst called United the perfect merger companion for Delta, with its trans-Pacific routes and international network matching up well with Delta's strengths on Atlantic and Latin American routes. "If anyone takes over Delta, bet on United," said CreditSights' Roger King.
Morningstar analyst Brian Nelson also said he sees a United pursuit of Delta as a possibility, even though it would conflict with its stated strategy of paying down debt.
Bill Hochmuth, an analyst who tracks airlines at Thrivent Financial for Lutherans, said Northwest Airlines Corp. could potentially be an acquirer, although probably as more of a merger of equals.
US Airways has received a commitment from Citigroup Inc. to provide $7.2 billion in new financing for the deal. The funding would be used to refinance Delta's debtor-in-possession credit facility, refinance US Airways' existing senior secured facility with GE Capital, and provide funds for the $4 billion cash portion of the offer.

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Old Posted Nov 16, 2006, 2:08 PM
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I hope delta turns it down. If it does happen salt lake WILL lose it's hub. And alot of jobs will be lost also. It's not a good deal for salt lake.
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Old Posted Nov 16, 2006, 3:37 PM
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Originally Posted by leebuddy
I hope delta turns it down. If it does happen salt lake WILL lose it's hub. And alot of jobs will be lost also. It's not a good deal for salt lake.

I don't know Leebuddy, According to U.S.Air, the SLC hub is a perfect mesh with the Phoenix hub and they have reassured all that changing Salt Lake's hub status would not be beneficial. Maybe there not be totally truthful?
I would be more worried about a United takeover of Delta.
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Old Posted Nov 16, 2006, 6:11 PM
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just relax set back and watch
these sould take your mind off delta and us air


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Old Posted Nov 16, 2006, 6:53 PM
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Originally Posted by Viperlord
*Nose held high in the Air*

"Heck, You know when we moved to SLC we moved here to feel a certain way. And that airport just doesn't seem to fit the SLC planning module. I really think its time for SLC to re-evaluate their planning process."
Bwah-ha-HA! I read that right after the TRAX/Draper thread. Perfect timing.

Hope this deal doesn't go through...it would be a real killer for SLC.
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Old Posted Nov 18, 2006, 1:40 PM
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Post Delta is wary of buyout

Airline tells creditors that its own plan is superior to US Airways bid

By Harry R. Weber
Associated Press

ATLANTA — Delta Air Lines Inc. is actively telling its creditors that it believes its stand-alone plan is "far superior" to US Airways' $8.7 billion offer to buy the company and create the nation's largest carrier, Chief Financial Officer Ed Bastian said Friday.
In an interview with The Associated Press, Bastian said he and Chief Executive Gerald Grinstein are telling creditors the company will review US Airways' bid disclosed Wednesday, but don't believe it's the right plan for Delta, which operates a hub at Salt Lake City International Airport.
"Jerry and I are on the phone with our creditors literally on a daily basis," Bastian said. "What we've told the creditors is we will consider the offer, but we still believe our offer is a far superior one."
Bastian also said the Atlanta-based airline will "fight to make certain" that the airline emerges from Chapter 11 in the first half of next year as a strong competitor, and it believes its stand-alone plan will be the "winning proposal."
Bastian said Friday that Delta plans to file its reorganization plan in mid-December, two months earlier than the Feb. 15 deadline. He said that was always Delta's plan and it hasn't moved up the date in light of US Airways' bid.
Bastian declined to say if Delta was considering any legal options to protect its interests.
Meanwhile, US Airways on Friday was still trying to set up a meeting with the official committee of unsecured creditors in Delta's bankruptcy case to pitch the offer to members, US Airways spokesman Phil Gee said.
The airline, based in Tempe, Ariz., hopes to set up a meeting as early as next week, Gee said, adding that no formal discussions have occurred between the two sides since the offer was made public. Spokeswoman Kelly Sullivan said later that "the company and its advisers have begun outreach to Delta's creditors' committee."
"I think we want to give them a little time to digest the proposal," Gee said. "We're extremely optimistic that we'll definitely be able to have a meeting with them. We feel this deal is in their best interest."
Senior Delta executives had been largely silent until Friday about the bid, beyond a news release and a memo and audio message Grinstein sent to employees.
Bastian said Delta is trying to answer its employees' and customers' questions in light of the developments.
"There is rightfully a significant amount of anxiety that this offer or proposal presents to our employees," Bastian said.
Also Friday, US Airways said its proposed buyout of Delta won't hurt competition and shouldn't trigger a regulatory challenge.
The airline said in a presentation it made to analysts and filed with the Securities and Exchange Commission that the industry is far more competitive than at the beginning of the decade, and new low-cost carriers like JetBlue Airways Corp. and AirTran Holdings Inc. have joined Southwest Airlines Co. as competitors.
The airline said even if it succeeds in its buyout of Delta it will control just 18.2 percent of the domestic market after it trims its fleet as part of the merger.
US Airways noted that the U.S. Department of Justice has not challenged a merger in more than 30 years where the combination created less than 30 percent market share. Bloomberg News reported that US Airways officials met with Justice Department officials Friday to discuss possible antitrust concerns with the offer.
Moreover, the airline said it would still face significant competition at most of its hubs and that all but 19 percent of travelers at airports it serves will have low-cost carrier choices.
The company also said the takeover was conservatively expected to save $1.65 billion a year in costs, helping it remain cost competitive. That figure assumes it can get approval of the deal before Delta exits bankruptcy.
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Old Posted Nov 23, 2006, 2:16 PM
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Post Delta pilots, officials join against US Airways bid.

By Harry R. Weber
Associated Press

ATLANTA — Hostile takeovers make strange bedfellows. Case in point: Delta management and its pilots union.
The two sides were at each other's throats earlier this year over Delta's ultimately successful effort to wring a second round of hefty pay cuts from pilots and win approval to terminate their pension.
But US Airways' $8.9 billion bid to buy Delta has put Delta management and its pilots union on the same side again in opposing the unsolicited offer.
The union's support of Delta's standalone plan could give management a boost with the company's creditors' committee in its bankruptcy case.
"We have a common threat from outside Delta Air Lines," the chairman of the pilots union's executive committee, Lee Moak, told The Associated Press on Wednesday.
The union is concerned about further job and benefit cuts if US Airways buys the Atlanta-based company. It also is worried about routes being dropped, and it believes higher ticket prices will result from the deal.
Moak told fellow pilots in a memo Tuesday that "should this merger be as misguided and as poor an idea as I currently believe it to be, then I will deploy every available resource to stop it."
But can he?
"They do have a stake, but probably not enough to block it," Ray Neidl, an airline analyst with Calyon Securities in New York, said of the pilots union.
But, Neidl added, "You do want to have the cooperation of the employees" if you are US Airways.
The Delta chapter of the Air Line Pilots Association negotiated a $2.1 billion unsecured claim as part of its most recent agreement to accept pay cuts and to not stand in the way of pension termination. The union has a seat on the nine-member creditors committee. Representatives of the Pension Benefit Guaranty Corp., Coca-Cola and Boeing are among other members of the committee.
PBGC spokesman Jeffrey Speicher said the federal pension insurer is "not expressing a view" on the US Airways bid. Asked if the agency was confident in Delta's standalone plan, Speicher said, "I can't get into any kind of back and forth on what may or may not be."
Dana Bolden, a spokesman for Atlanta-based Coca-Cola, declined to comment on the US Airways bid. Coca-Cola also was a creditor in US Airways' first bankruptcy case, Bolden said.
Moak said Wednesday in a telephone interview that the pilots union is in contact with members of Delta's creditors committee. Delta, too, has been speaking to the creditors committee. The airline's chief told employees in a memo Tuesday that was released publicly Wednesday that "you can be sure we will never support a transaction that does not provide for the protection of Delta people."
Phil Gee, a spokesman for Tempe, Ariz.-based US Airways Group Inc., said Wednesday his company is not surprised by the stance of the Delta pilots union. "It's something that we anticipated and expected," Gee said.
When US Airways announced the offer, it reached out to its pilots union and the national ALPA office, Gee said, adding that when it is appropriate it also will reach out to Delta's pilots union.
"We haven't gotten on that path yet because we haven't met with the creditors committee yet," Gee said. "We don't want to tread in places that we're not supposed to tread yet."
US Airways chief Doug Parker wrote in a memo to his employees Wednesday that he knows he has some work to do to win over Delta employees. "This is absolutely not about us versus them — to the contrary, this is about working together," Parker wrote.
Delta Air Lines Inc. management and its pilots have come a long way in mending their differences.
Earlier this year, the union was threatening a strike over Delta's effort to reject the pilots contract and impose pay cuts.
In April, the two sides reached an agreement for $280 million in annual concessions, which was on top of $1 billion in annual concessions the pilots agreed to in a five-year deal in 2004. The pilots also agreed as part of the latest concessions deal not to fight Delta's effort to terminate their pension.
There was no strike. The pilots continued flying. And Delta went back to restructuring its business as part of its plan to emerge from bankruptcy in the first half of next year.
Then US Airways' takeover bid last week shook the street.
Moak insists he never took the recent union and Delta management disagreements personally, and he believes the two sides can work well together now.
They may have to if they are going to beat back the US Airways offer, which has gained traction among some Wall Street investors.
"As far as the pilots are concerned, we're interested in a long-term viable carrier," Moak said. "Right now, the Delta standalone plan provides that, and that's what we believe."
Neidl, the airline analyst, said the people that are ultimately going to determine the fate of Delta are the creditors and the government regulators. He also said Delta's pilots could change their mind and support the US Airways bid.
"What they are for today they could be on the opposite side tomorrow based on what they think is best for their situation," Neidl said.
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