Company Watch - US Airways

Dec 18, 2006

Delta Valuation Rises Above US Airways' Bid. Bond investors are betting that Delta Air Lines is worth more than the USD$8.4 billion offer made by US Airways. Delta's bonds traded at around 67 cents on the dollar on Friday, traders said. With a claims pool estimated to be between USD$14 billion and USD$16 billion, current bond prices imply a valuation for the carrier of USD$9.4 billion to USD$10.7 billion. Even at the low end, it's higher than US Airways' cash-and-stock bid currently valued at around USD$8.4 billion and suggests investors are anticipating a sweeter offer. At least one alternative for creditors is in the works: Delta's stand-alone plan. Dec 15, 2006

The proposed United Airlines/US Airways merger in July 2001 would have forced "millions of consumers" to pay "higher fares and accept lower quality of service." That precedent indicates that antitrust regulators' main concern will not be airlines' bottom lines but whether consumers would pay higher fares for fewer service choices. Dec 15, 2006

US Airways already has argued that the rise of LCCs' market share in the US since 2001 diminishes the competitive concerns raised by DOJ when it opposed the UA/US combination. But DOJ's primary contention, expressed in a lengthy statement issued in July 2001, was that a "vigorously competitive airline industry is vital to our economy" and that consumers benefited from a wider variety of flying choices. Dec 15, 2006

US Airways in November proposed a deal to buy Delta, which is restructuring under the Chapter 11 bankruptcy protection process and still plans to emerge next year as a stand-alone airline. Dec 15, 2006

US Dept. of Justice almost certainly would review any proposed mergers and already has signaled its interest in examining the potential US Airways takeover of Delta Air Lines. DOJ likely will pay particular attention to consolidation's effects on fares and service options for passengers. When the department officially rejected the proposed United Airlines/US Airways merger in July 2001 (it first was proposed in May 2000), it concluded that the resulting airline was not in consumers' best interests. Its opposition to that tie-up was shared by the attorneys general of 12 states, including those of heavily populated and politically influential New York and California. A state or group of states could file lawsuits against proposed mergers, which would slow the consolidation process even if the suits ultimately failed. Dec 15, 2006

US Airways Chief Executive Doug Parker says the proposed merger with Delta would save the combined airline USD$1.65 billion annually and reduce capacity by 10 percent. A US Airways-Delta merger also would bolster their routes and further entrench a combined airline in regions currently served by both companies. Dec 14, 2006

US Airways seems to have set a consolidation wave in motion. No one wants to be the last to merge, he said, because takeover prices rise as potential merger partners dwindle. Dec 14, 2006

Delta board weighs US Airways bid: The board of Delta Air Lines on Monday discussed US Airways' $8.5 billion bid during a conference call, according to media reports. The board is not expected to issue a formal position on the merger for several days. Dec 12, 2006

Delta, US Airways merger would create overlap, attorney says. For a merger with Delta Air Lines to be successful, US Airways must be willing to divest routes, landing rights, gates and other assets to satisfy the concerns of regulators, an antitrust attorney says. Several carriers have expressed interest in purchasing assets from the merged carrier. Justice Department officials have met informally with both airlines to discuss the proposed merger. Dec 12, 2006

US Airways may select headquarters for merged carrier in Q1. US Airways says it could decide where its proposed combination with Delta Air Lines would be based by the first quarter of 2007. The company, which has bid more than $8 billion for Delta, is weighing whether the combined airline would be based in Arizona or Georgia. "The decision will be driven by what's in the best interest of the stakeholders, which includes the creditors, the shareholders and our employees," says C.A. Howlett, US Airways' senior vice president of public affairs. Dec 12, 2006

Editor: Aram Gesar, eMail: edit@AirGuideOnline.com

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Dec 11, 2006

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