Comments from today's WSJ on the proposed merger

[USA320Pilot]

Today the WSJ reported Gordon Bethune met with Delta executives late last week to review their standalone plan, and then with the Delta creditors committee at yesterday's meeting. People who have met with Mr. Bethune in recent days say he has indicted he thinks a Delta merger with US Airways makes sense and could win antitrust approval from U.S. regulators.

The sweetened (US Airways) offer was well received by Delta creditors, said one person familiar with the creditors' reaction. "It's a significant increase in value that changes the dynamic," this person said. Creditors now plan to pressure Delta to consider opening its books to US Airways as well as other potential bidders, this person said.

His presence already is having an impact on hte Delta matter. At a three-hour meeting with US Airways executives in New York on Monday, the notoriously blunt consultant urged the airline to put forth its best offer for creditors to review, according to people who were in the meeting or briefed on it.

Yesterday US Airways raised its bid early in the morning ahead of a regularly scheduled Delta creditors meeting (that Mr. Bethune attended).

Mr. Parker said Mr. Bethune's arrival in the process is like a breath of fresh air. "Frankly, it was refreshing to present (the merger plan) to someone who really understands how this works. We had a nice dialogue," he said of the meeting with Mr. Bethune.

"I have been a proponent of stabilizing the industry by consolidating," Bethune said. "The barrier to consolidation has been as much testosterone as it is the government," referring to airline executives who can't decide which CEO and management teams will run the combined airline. "Somebody's got to leave. That's always a big impediment to consolidation," he said.

Regards,

USA320Pilot

 

[SS255]

Has Gordon Bethune tried booking a ticket on usairways.bomb yet? I think if he has, he'd be singing a different tune!!!

 

[FWAAA]

It's December 11, 2007 already? Damn! I nearly slept the whole year away.

 

[jimcfs]

Birds of a feather flock together.

 

[PA18]

Has Gordon Bethune tried booking a ticket on usairways.bomb yet? I think if he has, he'd be singing a different tune!!!

When Stephen Wolf was still US Airways Chairman, he traveled from DCA to LGA for some sort of analysts meeting not long after 9/11.

He took the Delta Shuttle.

 

[bigbusboy]

I just finished reading this article. There was one very interesting comparison Bethune made that caught my eye immediately. About three quarters of the way through the article he explains how and why the majors should merge. He says airlines should marry partners that add complimentary routes in other parts of the world. "You don't put all of your eggs in one basket." And this is an excellent reason for a NW/DL merger, in my opinion. Then he goes on using the example: "when Europe is doing poorly, Latin America may be booming." I may be reading too much into this example. But isn't that exactly what will be the case in a US/DL merger? Won't the "New Delta" be a powerhouse over the Atlantic and in the Carribean/Latin America. He could have easily said: When Europe is doing poorly, Asia may be booming. This would clearly suggest NW/DL. But he didn't say that. I don't know. Maybe I'm just reading too much into this.

 

[BoeingBoy]

Personally, I think you may be reading too much into his choice of geographic examples. On the other hand, look at it from the perspective of his obligation to the unsecured creditors.

What would be best for them - a stand-alone DL already having strengths in the Caribbean, LA and Europe, a merger with a partner who brings little new to the table (given DL's existing and growing strengths in those areas), or a merger with someone who would bring other geographic strengths to the table?

Looked at from that viewpoint, which do you think he would see as the best choice given his statement?

Jim

 

[FWAAA]

UAL looks like a good marriage partner for DL; DL finally gets to LHR and China and plenty of access at NRT. DL gives UAL the strong Latin American, viable S American and strong JFK-Europe presence. Plus a fair number of high-yield customers in ATL.

CO looks like a good partner for DL for many of the same reasons, except for the dual hub problem in NYC, the lack of LHR access and sparse China access.

But if US offers the creditors the most money for DL, it is surely the best bridegroom.

 

[bigbusboy]

I just reread the article from your perspective and I see your point. The logical choice would be NW. US is no competition for anyone over the Atlantic and does nothing to strengthen DL. So we bring nothing to the table on that issue. I guess one could argue we would strengthen DL's position in the Caribbean...it's a stretch though. But if you read this part of the article and combine it with Parker's comments on how well his meeting went with Bethune, two whole days worth and he even said it was refreshing to talk to someone who is familiar with how this works. I don't know, it still sounds to me as though Bethune is going to try and convince the creditors and DL management to take the deal.

 

[USA320Pilot]

In my opinion, there is a lot to be said about balance in life. In the case of an airline it might be in the best interests to not have too big of an international operation due to potential geopolitical problems, terrorist activity, or disease. Would it make sense to have a more balanced route network?

For example, what if Bird Flu becomes a huge problem like SARS, or there is an international terrorist attack like Lockerbie, or Israel strikes Iran with tactical nuclear weapons. Would that hurt air travel again and in particular, international service? Would American’s be more inclined to fly domestically than internationally if there was another “shock†event?

I agree the industry is in play and Delta777 is right that today’s Barron’s/CBSMarketwatch column is very interesting.

See Story

I’m not sure how this is all going to work out. However, I believe US Airways’ sweetened offer for Delta will force the Atlanta-based company’s “executive suite†to react, either with US Airways, Northwest, or another M&A option. What that will be is anybody’s guess.

Moreover, I believe Gordon Bethune will have a big effect on industry M&A because he seems to be providing US Airways with advice to complete the Delta merger by recommending the Temp-based company increase its offer and he is a proponent of consolidation. In today’s WSJ indicated "I have been a proponent of stabilizing the industry by consolidating," Bethune said. "The barrier to consolidation has been as much testosterone as it is the government," referring to airline executives who can't decide which CEO and management teams will run the combined airline. "Somebody's got to leave. That's always a big impediment to consolidation," he said.

The Journal noted that “People who have met with Mr. Bethune in recent days say he has indicted he thinks a Delta merger with US Airways makes sense and could win antitrust approval from U.S. regulators,†which could influence the Delta creditor’s committee.

Regards,

USA320Pilot

 

[bigbusboy]

Interesting article. It almost makes it sound like we win if we don't merge with DL and lose if we do. If DL and NW do propose a merger, AA may turn that into a bidding war. And AA would probably be the winner.