This merger is not what Delta or US Airways bring to the merger alone, it is what two excellent companies would bring to the merger together.
US Airways has done its homework and this merger works because it brings the greatest synergistic financial gain out of all combinations, according to US Airways’ “executive suiteâ€. $1.65 billion is a huge number for an industry/companies that operate with high fixed costs and cash flow challenges. Because Delta is in bankruptcy the debtor has a lot of flexibility to reject contracts and leases that would be excess to the combined business enterprise. This flexibility permits the two companies to take out hundreds of millions of dollars of costs that cannot be extracted from combining carrier’s who are solvent.
I believe US Airways made a strong case during its December 21 conference call on why the merger should proceed, which I believe will solidify its supporters and other interested parties. In my opinion, the creditors committee’s desire to hire Gordon Bethune as their advisor and US Airways’ presentation last week will cause the creditors to force Delta to open its books to US Airways to begin the “due diligence†process.
The “due diligence†process and resultant merger “financial sunshineâ€; coupled with the growing belief that Delta management is misrepresenting information, could cause a corporate transaction that Delta employees would truly dislike, which I believe may not be in the best interest of US Airways and Delta’s stakeholders.
Why? As I indicated, I believe Delta’s creditors will force management to open the books to US Airways, which could ignite a bidding war for Delta by Northwest and/or United, along with US Airways.
I think it’s pretty clear most of Wall Street does not think much of Delta’s inflated standalone plan and the Atlanta-based company’s executive suite. Why? Many people believe Delta is misrepresenting information and the company, along the bankruptcy judge, are required to focus on their fiduciary responsibility to maximize the value to creditors, not their desire to obtain “golden parachutesâ€.
Meanwhile, a potential United-Continental merger is apparently fraught with ambivalence and “social issues†of “who would run the new airline, along with structural complications of the Northwest “golden share†provision. But, United has made its position well known about its desire to merge and both United and Northwest have hired M&A advisors.
Thus, I believe a bidding war could erupt for Delta and/or its assets, which could lead to the Atlanta-based carrier being fragmented. Will this happen? Maybe, maybe not, but I would be very concerned about this scenario unfolding if I was a Delta employee, because my could be worse, much worse, than merging with US Airways, who will be one of the most profitable U.S. airlines in 2006.
US Airways and Delta’s employees can create a great airline and a great team. Instead of throwing barbs at one another why not talk about how the two companies can come together to create a supreme product for our customers and greater job security, pay, and benefits for its employees.
Best regards,
USA320Pilot
