In a telephone conference with analysts and reporters, US Airways CEO Doug Parker said Delta's efforts to discredit its merger proposal were failing to win over Wall Street or creditors. His remark was preceded two days earlier by a swipe from Delta CEO Gerald Grinstein, who said US Airways would be the worst of all potential merger partners.
Parker continued his offensive by saying that Delta put forth a reorganization plan Tuesday that attempts to convince its creditors that US Airways' $8.4 billion bid isn't as valuable as they may think it is. Simultaneously, Delta's plan places an unrealistic value of $9.4 billion to $12 billion on the bankrupt airliner as a free-standing airline, he said.
"This is a transaction that makes all the sense in the world, that we are dedicated and committed to continue to pursue, and are highly confident that we are going to get closed," Parker said.
"The reason we feel that way is because it is in the best interests of the creditors of Delta, and it is in the best interests of the shareholders of US Airways. It is also in the best interests of the combined employees at both companies, all of our customers [and] all of our communities served."
Delta reacted strongly, saying its plan to exit bankruptcy next year will give creditors, who are owed about $15 billion, more money - and sooner.
"Nothing we heard [Thursday] explains away the fact that the US Airways proposal provides inferior value to our stand-alone plan, is structurally flawed, and raises overwhelming regulatory and labor issues that - after a lengthy delay - are likely to prevent the proposed merger from being completed," Delta spokesman Anthony Black said in an e-mail.
It's hard to know which airline has the upper hand in the war of words, which has been seesawing since US Airways announced its surprise offer Nov. 15. But hostile is normal in a hostile takeover, said James Lukaszewski, head of The Lukaszewski Group, a New York crisis communications management company.
"Both of them are puffing at each other. It's part of the ritual. Not only that, hostility is required. Sooner or later, [Parker and Grinstein] have got to go to their country clubs. They don't want to hear their peers say, 'Hey, you were a wimp. You chickened out.' "
The merger would create the world's biggest airline, and Parker thinks investors like the deal. Delta's bonds, a bellwether of sentiment, surged from around 40 cents on the dollar after the announcement to more than 60 cents on the dollar and haven't backed down.
But Mike Boyd, a Colorado-based airline analyst who has consulted for both airlines, thinks Delta is ahead - and should be.
"This is a bad deal, and there should be rancor because what US Airways is trying to do is decimate competition. You can make more money if you take out your major competitor on the East Coast, especially when planes are 80 percent full," Boyd said.
Morgan Durrant, a spokesman for US Airways, said the Tempe, Ariz.-based carrier doesn't believe the rhetoric used by either airline is over the top.
"I wouldn't characterize it as unusual. We expected Delta was going to respond with their preference to remain independent. As far as trying to decimate competition, it's certainly not our intent. As far as making money, we look at it as a stability thing. A financially secure airline means secure jobs in an industry that has been volatile."
Delta's board of directors formally rejected the US Airways offer when it filed its reorganization plan with a bankruptcy court in New York. Some analysts expressed surprise at what they said was impudent language in the No. 3 airlines' court papers.
"Language in the documents is more aggressively anti-US Airways than we anticipated," Lehman Brothers analyst Gary Chase said in a note to investors. Helane Becker, an analyst at Benchmark Co., also said Delta's words were aggressive.
Black said Delta does not respond to comments by analysts.
Ultimately, Delta's creditors will have the final say about which airline controls the company. The official creditors committee appointed by the court has said little. Kristen White, a spokeswoman for the law firm representing the unsecured creditors, said she didn't know when the group will express its preference.
The committee has only said that it supports Delta's decision to file its plan. It said a number of unresolved issues will be discussed "over the coming weeks."
pbeebe@sltrib.com
