Industry Experts See Little Chance for Mega Mergers

Industry experts say the recent retreat in airline stock prices despite strong financial results is due in part to the growing opposition to US Airways hostile takeover bid for Delta Air Lines. It appears Doug Parker, while valiant in his effort, has failed to gain the necessary support from Delta creditors as it faces deadlines this week and next. The Wall Street Journal reported Monday that US Air is willing to increase its hostile takeover offer for Delta Air Lines Inc. by adding $1 billion in cash under certain conditions and giving creditors a termination fee in case regulators block the deal. Most insiders see the increase as a last-ditch effort by Parker.

Industry Analyst Ray Neidl agrees that recent declines in US Airways shares are due at least partly to growing pessimism by investors about it being able to win the necessary support of its Delta bid. "People are really doubting this deal is going to happen," he said. "The creditors are leaning away it."Neidl said his sense is that creditors would prefer to let Delta emerge from bankruptcy as an independent carrier, something that could take place as soon as April, giving them stock in the new carrier that they can cash out in the current strong environment for airline shares. Neidl said Delta's emergence from bankruptcy would be pushed back a minimum of six months if creditors convinced the bankruptcy court and Delta management to take the US Air offer. And antitrust regulators could delay it even longer than that, if they approve it at all.If the Feb. 7 bankruptcy hearing is held, it will be a victory for Delta management, which hopes to win approval of its reorganization plan from the court and the creditors as soon as possible.