- The Washington Times - Wednesday, January 31, 2007

Delta Air Lines has successfully thwarted a hostile takeover attempt by rival US Airways, as the suitor withdrew its almost $10 billion offer yesterday after Delta’s creditors endorsed the bankrupt airline’s plan to remain independent.

A committee representing Delta’s unsecured creditors said the financial risks and the amount of time needed to successfully complete the proposed buyout were too great to support.

The committee said it “has determined that it will support the stand-alone plan of reorganization as finally agreed upon between Delta and the Creditors Committee.”

US Airways previously had said it would withdraw its cash-and-stock offer by today if it couldn’t win over support of the creditors.

US Airways Chairman and Chief Executive Officer Doug Parker said he was disappointed with the creditors’ decision and criticized them for “ignoring its fiduciary obligation.” He added that his company’s offer was worth substantially more than Delta’s stand-alone plan.

“We would have created a better and more financially stable airline that offered more choice to consumers and increased job security to its employees,” he said. “Our merger would have been able to be consummated in a reasonable time frame and we would have been able to obtain all requisite regulatory approvals.”

But Delta Chief Executive Officer Gerald Grinstein, whose company repeatedly has said it wanted to exit bankruptcy alone, deemed yesterday a proud day for the airline.

“Our focus now is on the work still before us to emerge from Chapter 11 this spring as a strong, healthy and vibrant global competitor,” he said.

The Atlanta airline, which has been operating in bankruptcy protection since September 2005, said it will be worth $9.4 billion to $12 billion upon emerging from bankruptcy.

Delta rejected US Airways’ initial offer of $4 billion and 78.5 million shares made public Nov. 15, saying the plan would burden the combined carrier with debt, face insurmountable antitrust issues, and result in job cuts and a loss of flights to smaller cities.

US Airways on Jan. 10 increased its offer to $5 billion in cash and 89.5 million shares. The stake Delta creditors would have held in the merged company rose to 49 percent from 45 percent.

US Airways, based in Tempe, Ariz., itself emerged from bankruptcy protection in September 2005 when low-cost carrier America West Airline bought it as part of a deal that consolidated the airlines.

Airline analyst Darryl Jenkins said he initially predicted Delta creditors would accept the buyout. But a vigorous public relations campaign by Delta turned momentum and public sentiment to the side of the Atlanta carrier.

“In the end Delta did a good job defending itself,” he said.

Delta’s defense was highlighted at a Senate Commerce, Science and Transportation Committee hearing last week, when dozens of Delta employees packed the meeting hall in support of their airline, and even more supporters lined up outside the building.

Mr. Parker, who urged the panel to “let the market work,” was criticized by several senators worried that a consolidated airline would result in cutbacks in service to small communities.

Delta’s pilots’ union, a large creditor, also supported their company’s goal of remaining independent.

Shares of US Airways rose $2.88, or 5.4 percent, to $55.98 yesterday in New York Stock Exchange composite trading. It was the largest one-day gain since US Airways made its Delta offer public on Nov. 15. Delta shares fell 7 cents to $1.09 in over-the-counter trading.

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