Delta CEO vows to fight takeover bid
Gerald Grinstein says a buyout by US Airways would be a bad deal for consumers and Delta.
By WASHINGTON POST
Published December 6, 2006
WASHINGTON - The top executive at Delta Air Lines said he would vigorously defend his company against an unsolicited takeover bid, insisting that the Atlanta-based carrier would be a stronger company and better for consumers as an independent carrier.
In his first interview since US Airways Group announced its merger proposal last month, Delta chief executive Gerald Grinstein said he was confident that creditors would accept his reorganization plan. He also said it would be difficult for a combined company to overcome internal and regulatory hurdles.
"Whenever you go from having two carriers to one, or three carriers to two, that is going to have a consumer impact," he said. "There will be a loss of service in some smaller communities. There will be an increase in fares. ... There is no question that there are antitrust issues that won't be quickly or easily resolved."
Delta and US Airways are battling to convince creditors, regulators and legislators of the virtues of their competing plans. Many outside analysts and airline executives think the industry needs to consolidate to improve its financial outlook.
Grinstein, 74, has been working to get Delta, the nation's third-largest carrier, out of Chapter 11 bankruptcy protection for the past year. He is expected in the coming weeks to present creditors and the court with a reorganization plan that he says would be better for creditors than US Airways' $8.5-billion offer.
Several analysts and executives at other airlines said US Airways appears to have lost momentum as investors and creditors look more carefully at the merger proposal.
Among their concerns are the reaction of regulators, the new Democratic-controlled Congress and the short time available for US Airways to complete a deal. US Airways hopes to complete it before Delta leaves bankruptcy court protection, which is expected next year.
"There are more chances of this deal being killed because of market forces and the Justice Department," said Michael Miller, an analyst with the Velocity Group.
US Airways chief executive W. Douglas Parker said he was confident that the merger will be completed. Creditors seem receptive to the offer, he said in an interview. "It was well-received, and the process continues. The process is gaining steam."
Parker expressed confidence that the companies could address antitrust issues. A combined airline would probably have to sell some airport gates and one of the lucrative shuttle routes between Washington, New York and Boston, US Airways executives acknowledge.
Parker is interested in Delta because the two airlines compete on many of the same routes. A merger would allow him to reduce the number of flights and aircraft serving those cities. He thinks such a business plan would save $1.6-billion a year by combining functions and cutting flights.
Parker said such a strategy would benefit consumers by offering them a healthier airline that serves more destinations. He said the new airline would not raise fares.