Delta bid deadline nears

0 Comments | Deseret News (Salt Lake City), Jan 31, 2007 | by Deseret Morning News wire reports

PHOENIX -- US Airways CEO Doug Parker said Tuesday he would not pursue a hostile bid for Delta Air Lines if it emerges from bankruptcy.

"We've got a company to run," Parker said in a conference call with reporters. "We're not going to keep chasing this thing, even though we've got a bunch of people telling us we should."

Parker said he would hold Delta's creditors to a Thursday deadline to begin moving forward on its $9.9 billion bid for the Atlanta-based carrier, which operates a hub at Salt Lake City International Airport.

To keep the offer alive, Parker said Delta's creditors have until midnight on Thursday to request a delay in a Feb. 7 bankruptcy hearing on Delta management's bankruptcy plan. The creditors also must call on both companies to begin the federal regulatory process and a due diligence process that would open Delta's books for US Airways.

If this doesn't happen, and Delta emerges from Chapter 11 as a standalone company, Parker said he would no longer pursue the airline. But while US Airways has said Thursday is the deadline for the current offer, the carrier has declined to comment on whether it would make other offers for Delta after that.

Parker said it would be more difficult to make money if US Airways were to combine with a standalone Delta.

For example, Parker said, US Airways wouldn't be able to cut costs like it can now with a bankrupt Delta. A standalone Delta also would come with a number of contracts and leases that wouldn't be part of a US Airways operations plan.

"The new company would be committed to those and wouldn't have the ability to work through the bankruptcy court to get those terminated," Parker said.

If US Airways combines with Delta now, the company says it could save $1.65 billion per year by trimming its fleet of aircraft, cutting redundant routes and other synergies.

Parker said he continues to wait for a response from Delta's official creditors committee, which hasn't said anything publicly since US Airways increased its bid earlier this month.

"We'll do whatever they want us to do," Parker said. "We'll go and meet with them, if they want us to."

Delta took another step toward emerging from bankruptcy Tuesday by securing $2.5 billion in loans to finance the move.

JPMorgan Chase & Co.; Goldman, Sachs & Co.; Merrill Lynch & Co.; and three other banks will lead the lending group, Delta said in a statement. The money will be used to repay $2.1 billion in debts Delta took on in bankruptcy and to increase the company's cash balance.

"Delta did a good job on its restructuring, and this is just another step," said Ray Neidl of Calyon Securities Inc. in New York. "They're going to be able to make some good money on their own."

Delta plans to leave court protection as a standalone carrier by April 30. Its financing package will consist of a $1 billion revolving credit line and term loans of $1 billion and $500 million. The three other lead banks are Lehman Brothers Holdings Inc., UBS AG and Barclays Plc.

"This is an important milestone in the successful implementation of our restructuring plan," Edward H. Bastian, Delta's chief financial officer, said in the statement.

Neidl said no matter what happens by Thursday, US Airways probably will continue to look to combine with other carriers.

"I wouldn't be surprised if they didn't do this deal, they wouldn't be out hunting again pretty soon," Neidl said.

When US Airways first bid for Delta in November, analysts speculated whether the deal would set off a wave of mergers and acquisitions in the industry.

But Parker said Tuesday he didn't believe there was much chance for more consolidation.

"It's my own view that if both Delta and Northwest emerge from bankruptcy standalone, I don't think you'll see consolidation of the airline industry in this cycle," Parker said.

"Not until you find airlines in financial distress will you see consolidation happen."

Contributing: The Associated Press; Bloomberg News