US Airways wants Delta

Marketplace Contributor Nov 15, 2006


SCOTT JAGOW: Today, US Airways made an $8 billion dollar offer to buy its rival, Delta Airlines. That is, after Delta gets out of bankruptcy. Marketplace’s Hillary Wicai has more.

HILLARY WICAI: If approved, the merger of US Airways and Delta would create one of the world’s largest airlines and would operate under the Delta name.

US Airways says it knows what its doing because it recently came out of bankruptcy and merged with America West.

US Airways CEO Douglas Parker says the deal makes sense because bankruptcy gives the airline the ability to renegotiate leases and contracts producing significant annual cost savings.

DOUGLAS PARKER:“There’s not an airline out there today who on its own is producing $1.65 billion in profits. The simple act of putting these companies together is creating more value than any airline that’s flying today.”

Parker also says the merger would not require laying off employees. The deal would however need bankruptcy court and other approvals.

Parker added the company would be prepared to sell off one of the two shuttle services operated by both US Airways and Delta, to satisfy antitrust concerns.

In Washington, I’m Hillary Wicai for Marketplace.

JAGOW: Now let’s back up here a second. There’s a good chance Delta will turn down US Airways. Kieran Daly is an editor with Air Transport Intelligence in London.

KIERAN DALY: I think it’s pretty clear Delta was taken by surprise today. We were in a press conference with an executive vice president who’s over here in London launching a new route that they have and we literally told him the news in fact. And he was fairly robust in his response. He was very sure, of course he didn’t have any advice from Atlanta, but he was very sure that they will still be rejecting the bid.

Of course, US Airways CEO Doug Parker believes Delta should say yes, but airline analyst Julius Maldootis says this industry is notorious for bad mergers.

JULIUS MALDOOTIS: In fact there are those observers who are saying that the reason Mr. Parker will propose another merger, because he now faces sever challenges between the various union groups at America West and US Air

Still, US Airways is trying to round up support a Delta merger. I got an e-mail from the company this morning touting the benefits of a deal with Delta. The e-mail was sent out to Dividend Miles customers.

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