US Airways Bid for Delta Hits Turbulance

Gerald Grinstein contacted the "fat lady" yesterday following Senate Hearings in Washington D.C. It appears she has been asked to sing a song now that US Airways hostile bid is about as likely as you running into Osama Bin Laden at your local Supermarket. Witnesses could hear her warming up last night in Atlanta. It is not clear what song she will be singing but what is clear is Doug Parker's hostile bid for Delta Air Lines is loosing altitude. What was also clear from Wednesday’s hearings is that Delta has overwhelming support for their standalone plan as they presented 104,851 e-petitions signed at http://www.keepdeltamydelta.org/ opposing US Airways' hostile takeover attempt. Delta people then delivered the signatures to Senate offices. Additionally, more than 155,000 letters of opposition have been sent to members of Congress and the Administration.

Appearing at a packed hearing before the Senate Commerce Committee Wednesday, Delta Air Lines CEO Gerald Grinstein said both workers and consumers will suffer if US Airways' takeover bid for Delta succeeds. Grinstein called the hostile takeover plan a "flight of fancy" that would saddle the resulting company with tens of billions of dollars of debt that he felt would, despite assurances to the contrary, make furloughs unavoidable. The debt load from the combined companies could skyrocket to more than $24 billion. That alone will probably be enough to persuade the creditors committee that Delta's standalone plan presents the greatest value. Several reports surfaced this week that suggested the creditors committee has grown skeptical of US Airways proposal although they have made no official comment. It's unclear what Parker will do next. He is on record as saying that his offer would be withdrawn on February 1st if the creditors committee had not given its approval. Although it us not clear what Parkers next move will be, it was obvious his plan was dealt a serious blow on Wednesday when almost no one testified in favor of his proposal. One industry analyst said that Parker would be best served to withdraw is proposal and move on. I couldn’t agree more.

Witnesses diss Delta takeover -- and mergers in general

Witnesses diss Delta takeover -- and mergers in general
Pacific Business News (Honolulu) - 7:21 PM HAST Wednesday

by Howard Dicus

The prospect of Delta Air Lines being acquired by US Airways appear dim after almost no one testified in favor of it at a Senate hearing Wednesday.

A high-profile hearing of the Senate Commerce Committee, chaired by Sen. Daniel Inouye (D-Hawaii) and playing to a standing room only audience that included Delta pilots in uniform, featured assurances by US Airways CEO Doug Parker that were met with skepticism by airline industry analysts who also testified, and by senators themselves.

"We will not furlough any frontline employees of Delta or US Airways as part of this merger," Parker testified. "We will align the work group cost structures between current US Airways and Delta employees, and going forward we will move to the higher cost scale."

But Delta CEO Gerald Grinstein called the hostile takeover plan a "flight of fancy" that would saddle the resulting company with tens of billions of dollars of debt that he felt would, despite assurances to the contrary, make furloughs unavoidable.

"The stage is set for Delta to emerge as a powerful, competitive force to be reckoned with," Grinstein said. "Our company will emerge from bankruptcy as a formidable global competitor. Delta doesn't need to be acquired."

The Bush administration took a measured view. Andrew Steinberg, assistant secretary of transportation for aviation, said the White House does not automatically assume that industry consolidation is bad for consumers, but does not consider mergers a panacea for industry problems.

Senators on the committee, not including any from Delta's home state of Georgia, mainly seemed worried that the merger could lead to service cuts to their own home states. Some analysts who testified said mergers can tie up management without solving problems that stem from cost structures. And the Consumer Federation of America said airline mergers would be bad for fliers.

"Mergers like US Airways-Delta will result in rising prices and reduced service because they eliminate competition on thousands of routes where there are already too few competitors to prevent price gouging and abuse of market power," said Mark Cooper, the federation's director of research. "The hostile takeover of Delta by US Airways should be rejected."

Doug Parker had earlier said that the advantage of a US Airways acquisition of Delta was that the two both had heavy route networks in the Caribbean and across the Atlantic and could eliminate duplicative service without cutting service to any destination.

Gene Kimmelman, vice president for federal and international affairs of the Consumers Union, said market power needs to be analyzed on a market-by-market basis since it is lack of competition at the point of sale that triggers abuse.

"We have not opposed every merger that has come down the runway," he said, "but the current mergers between major airlines clearly have massive anticompetitive effects."

Kimmelman predicted that mergers will mean more work for Congress because market forces will stop holding air fares down and lawmakers will need to look for statutory or regulatory solutions.

Delta Air Lines flies to Hawaii from Atlanta, Cincinnati and Salt Lake City, none of which have nonstop service to Hawaii by any other carrier, and it among the many airlines flying nonstop to Hawaii from Los Angeles. US Airways flies to Hawaii from Phoenix and several California cities.

Battle for Delta Lands on Capital Hill

At a rally today on the U.S. Capitol grounds in anticipation of Wednesday’s Senate Commerce Committee hearing, Delta pilots, board council members, retirees, employees, and elected officials, announced that as of this morning more than 104,851 people have signed a petition on the KeepDeltaMyDelta.org site opposing US Airways’ hostile takeover attempt of Delta. Additionally, more than 155,000 letters have been mailed to members of Congress and the Bush administration voicing opposition to the merger proposal.
“For more than 60 years, Delta Air Lines has thrived as a leading employer of countless Georgians and has established itself as an economic engine for the Southeast,” said Senator Saxby Chambliss (R-Ga.) during the rally at the Capitol. “Delta has met its challenges head-on and these hard-working folks deserve the opportunity to follow through with their plans to emerge as an independent company. I am pleased that my colleagues on the Senate Commerce Committee have scheduled this hearing to ensure that the content and potential effects of this proposal are carefully examined.”
Delta Board Council members along with active and retired Delta employees also are personally delivering that message to congressional representatives on Capitol Hill in Washington, D.C. today to urge their support of an independent Delta. The group will call on senators from 32 key states that would be affected if US Airways’ unsolicited merger proposal is approved. They are providing senators with information outlining Delta’s reasons for opposing the merger, notably its anticompetitive aspects.