One of Delta management's arguments to the creditors is that the risks of rejection by the Justice Department are so high that pursuing a merger would be a waste of time and energy just as the carrier's standalone recovery effort gains steam. Past public comments from agency officials suggest such a large-scale deal would have a tough time getting approved.
But US Airways executives argue that the deal can win department approval because the post-Sept. 11 industry landscape has created a need for consolidation and more stable companies. It also has said it's willing to shed assets to appease anticompetitive concerns.
Jon Ash, a longtime airline industry consultant, said both airlines' arguments have merit, but he still believes a merger would have low odds of Justice Department approval. Ash's firm, InterVistas-GA2, is advising some Wall Street investors who are monitoring the proposed deal but aren't directly involved.
Ash said the department could have even more problems with a US Airways-Delta merger than it did with the United-US Airways proposal of 2000, which it blocked.
"Frankly, there is some pretty heavy concentration of traffic when you put these two together," he said of the US Airways-Delta proposal. The combined carriers would account for 39 percent of revenue and 36 percent of airline seats in the eastern United States, he said.
Justice Department officials have declined to discuss the matter other than to confirm an initial investigation is open.
J. Bruce McDonald, the DOJ official who heads the department that would have to review the merger, said in a 2005 speech that even if one of the carriers in a proposed merger is in bankruptcy, that isn't likely to affect approval unless one is in danger of failing.
That's not the case with Delta, which is "very likely" to emerge from bankruptcy as a strong competitor, said Ash.
The Justice Department review process is legal, not political. But politics could help sway the outcome, said Ash.
"At some point these decisions have to be brought before an assistant attorney general" or some other political appointee, he said. "They're probably going to get some heat from both directions," including investors who back the merger.