Ultimately, however, control of Delta is in the hands of its unsecured creditors, who must now measure the value of the airline's plan against US Airways' bid - or show their displeasure with both in hopes of attracting an offer from another airline.
For now, industry analysts say a Delta-US Airways merger faces long odds, though most are not counting it out. "In the face of unanimous dissent from the Delta board, we think it will be extremely difficult for this merger to go forward," James Corridore, an analyst for Standard & Poor's, said after Delta submitted its plan to a bankruptcy court in New York.
"As we see it, US Airways' options are to raise its bid, try and sway creditors or retract its bid."
Last month, US Airways offered Delta an $8.4 billion deal that would give creditors $4 billion in cash and 78.5 million shares of stock. The combined companies would fly under the Delta name.
On Tuesday, the Tempe, Ariz.-based airline issued a statement saying it was still committed to its proposal, which it contends offers creditors more value than Delta's plan.
"We remain a disciplined and determined bidder for Delta," US Airways CEO Doug Parker said Tuesday.
Delta responded to US Airways' offer with combative language and a five-year business plan to give creditors new stock in a restructured company that would return to profitability through revenue growth and cost savings, with projected net income of about $500 million next year and $1.2 billion in 2010. Delta's current stock would be canceled. The plan would give creditors roughly 63 percent to 80 percent of their allowed claims, possibly as soon as the creditors and bankruptcy court approve the plan, if indeed they do.
Delta "management believes that it has a solid plan, which seems feasible to us, to be competitive as a stand-alone carrier. The plan is impressive," said Calyon Securities analyst Ray Neidl.
Corridore, the S&P analyst, took a slightly different view. He said a merger between the two airlines "would unlock more value" for creditors and consumers, adding that he thought US Airways has been unduly criticized for not having completed its prior merger with America West.
"US Airways faces an uphill battle against Delta's intransigence regarding a merger. However, US Airways seems more determined than we expected," Corridore said.
Delta said its financial adviser, The Blackstone Group, has estimated the value of the company at $9.4 billion to $12 billion - roughly 12 percent to 43 percent more than the US Airways offer announced last month.
"We developed this plan in lockstep with creditors over the last few months, so they are well aware of the plan. We believe they are pleased with our progress, to date," Jim Whitehurst, Delta's chief operating officer, told The Tribune Tuesday.
Whitehurst pledged that the Salt Lake hub would play an increasingly important role. In the past year, the carrier has added 30 nonstop destinations. In the past month, Delta has announced routes to Charlotte, N.C., and Pittsburgh, and more East Coast destinations are under consideration. The airline is also exploring a first-ever route from Salt Lake to Europe.
"We are thrilled with our revenue performance in Salt Lake," Whitehurst said.
Delta filed for bankruptcy in September 2005. It has used the ensuing 15 months to cut labor costs, reduce its fleet size and move deeply into international flying, which is more profitable than most domestic service because of government-to-government agreements. The airline said Tuesday that is has achieved 85 percent of the cost savings it sought when it went into bankruptcy.
Employees from the Salt Lake area have taken notice.
"We are changing the whole structure of this airline - where we fly, when we fly and what aircraft we fly on those routes, producing a major increase in revenues," said Ed Thiel, a Salt Lake-based pilot.
Delta pilots, other employees, their spouses and company officials gathered Tuesday at Salt Lake City International Airport, where they signed an electronic petition opposing the merger.
In its plan, Delta took several swipes at US Airways, saying the smaller airline's offer is structurally flawed and can't succeed because of "overwhelming" labor and antitrust issues. Delta said US Airways' claim that the merger would save both airlines $1.65 billion a year is based on flawed economic assumptions. And the combined company would have $23 billion in debt, more than any other airline and three times as much as Delta estimates it will owe as a stand-alone carrier.
Some analysts thought Delta had overstated its criticism of US Airways' bid and its chances for success. They said Delta's bellicose remarks paint an inaccurate picture of the offer, which actually might be a better deal for creditors.
"Language in the documents is more aggressively anti-US Airways than we anticipated, as Delta calls into question anti-trust issues, integration capabilities and US Airways' ability to implement capacity reductions as outlined in its plan," Lehman Brothers analyst Gary Chase said in a note to investors.
Jay Westbrook, a University of Texas bankruptcy law professor, said US Airways' offer of $8.4 billion isn't much lower than the the valuation of Delta made by its financial advisers.
"The number one question is valuation," Westbrook said. "So one wonders how firm that valuation is and whether [creditors] might prefer to take a bird in the hand."
Delta declared bankruptcy on Sept. 15, 2005, citing huge losses related to record jet fuel prices and stiff competition from low-cost carriers.
pbeebe@sltrib.com
