- The Washington Times - Thursday, December 21, 2006

US Airways is continuing to push its takeover of Delta Air Lines, even as the bankrupt creditors say they’re not interested in the $8.4 billion offer.

US Airways Chairman and Chief Executive Doug Parker yesterday accused Delta of intentionally misleading its creditors and the public by maligning US Airways’ proposal, which was offered Nov. 15 and includes $4 billion in cash and 78.5 million company shares.

He added that Delta’s plan to emerge from bankruptcy alone is “unrealistic” and worth far less than US Airways’ offer.

US Airways, the nation’s sixth-largest airline, says combining with Delta, the nation’s third biggest after American and United, would create annual benefits of $1.65 billion.

“We are going forward [with our plan] and we’re dedicated to getting this done,” Mr. Parker told analysts during a telephone conference yesterday.

But Delta says it is determined to remain an independent airline. On Tuesday its board unanimously rejected US Airways’ offer, saying it was “substantially inferior” to its own reorganization plan.

The board filed a five-year business strategy with the U.S. Bankruptcy Court in New York. The plan lets unsecured creditors recover 63 percent to 80 percent of their claims.

Delta’s proposal values the airline at as much as $12 billion. The airline has forecast a net income of $450 million in 2007 and $1.2 billion in 2010.

Trading of Delta unsecured bonds has increased from about 40 cents on the dollar Nov. 14 — the day before US Airways announced its intention to buy Delta — to about 66 cents on Wednesday, which Mr. Parker says validates his company’s offer.

“This obviously shows that the creditors of Delta believe that the US Airways merger proposal is worth more than [Delta’s] stand-alone” plan, he said.

But Delta’s creditors remain unconvinced. The airline’s creditors committee, appointed after the carrier filed for Chapter 11 protection in September 2005, announced Wednesday it was supporting Delta’s reorganization plan.

Delta’s pilots’ union, a large creditor and committee member, also has said it supports Delta’s mission to remain an independent carrier.

The creditors did leave open the possibility of entertaining future offers.

The committee “will continue to consider potential alternatives in order to maximize the ultimate recoveries for the unsecured creditors in the Delta bankruptcy,” the group said Wednesday.

Many analysts had been skeptical that US Airways would be able to pull off the acquisition, even before the creditors’ announcement.

Antitrust issues would be difficult to overcome, they said. And a merger of the two airlines would create a cumbersome system with eight hubs — far too many to be cost-effective.

Mr. Parker downplayed the antitrust question, saying that the issue is “fully manageable.”

“We did not go launching this offer without knowing that and assessing the risk of antitrust,” he said.

Even if the proposed deal with US Airways falls through, some industry analysts predict that Delta, with its attractive European routes, will have future suitors.

“We thought it was noteworthy that [Delta] management made the point in its conference call with investors [Wednesday] that it is not inherently opposed to considering mergers, but rather the specifics of the US Airways combination,” said Clark Orsky, an airline analyst from KDP Investment Advisors.

“We think merger possibilities will remain in the forefront of investors’ minds so that, even if [Delta] shortly exits Chapter 11 as an independent carrier, the company will remain a merger candidate for a while.”

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