US Airways Tries to Start Delta Engines in a Tailwind Airline Comment, 11/27/2006
Based on
the current stage of negations, in our judgment, the probability of a
successful US Air takeover of Delta is less than 20%—despite
individual negotiations and lobbying by US Air of major creditor groups.
US Airways is relying on some Delta Creditor’s to jumpstart its bid
to takeover the legacy carrier Delta. Our lack of confidence in US Air’s
ability to pull of its $8.67 billion offer for the Bankrupt Company is
influenced by the fact that Delta has yet to present to the
Bankruptcy Court its plan of reorganization and unless and until Delta
should change its position on emerging from Bankruptcy on a stand-alone
basis, US Air “is held at the gate, with its seats in the upright
position and locked position and seat belts safely fastened.”
With one of the most important participants in this proceeding,
particularly the pilots yet to be integrated into the US plan, and Delta
a mere three weeks away from introducing its proposal, no accord should be
expected. Adding Delta’s Labor force to the mixture (i.e., US Air /
Delta), is only destined to marginalize existing Delta employees,
thereby enflaming labor and leading to a large segment of the labor
force feeling “outcast.” Labor may only represent 15% of equity, yet its
influence far exceeds this number and remains the key to post-merger
viability. This factor, combined with the fact that the Delta Board
feels that their plan to emerge from bankruptcy is the correct course of
action—as opposed to deals that are being made in smoke-filled back
rooms—is not creating a positive, co-operating spirit among those
players who will ultimately be asked to ratify the reorganization
proposal.
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