US Airways Won't Fight over Delta Deal

Dec. 6, 2006
US Airways will give up its proposed takeover of Delta Air Lines if management there can't be persuaded of the benefits.

US Airways will give up its proposed takeover of Delta Air Lines if management there can't be persuaded of the benefits, US Airways CEO Doug Parker said Tuesday.

Parker said he's not prepared to fight Delta's management in bankruptcy court by submitting a merger plan to the judge without the backing of Delta officials.

"We have to get to a point where we are all working together on this, or it's not going to happen," Parker said at a meeting with editors and reporters at USA TODAY. "This is all about convincing Delta's management that this plan makes sense."

US Airways has made an unsolicited takeover offer of $8.5 billion in cash and stock to acquire Delta, the USA's third-biggest carrier.

Delta's management has rebuffed the offer, saying it's too risky and that Delta is better off as an independent airline. Delta declined to comment on Parker's remarks. Delta CEO Gerald Grinstein has repeatedly voiced opposition to the merger proposal since US Airways announced it Nov. 15.

In a memo to employees Tuesday, Grinstein said Delta, "is making crucial progress toward becoming a strong, independent, stand-alone company."

But because Delta is in bankruptcy, its management does not have complete control of the company's fate. Its creditors must approve Delta's post-bankruptcy business plan before the airline can exit. Delta executives plan to unveil the plan this month.

Delta CFO Ed Bastian has expressed alarm that a merger would prolong the airline's stay in bankruptcy at least by several months because it would have to be reviewed by antitrust experts at the U.S. Department of Justice. That would increase Delta's bankruptcy costs and run the risk of a downturn in the economy or a spike in jet fuel prices, Bastian says.

Parker predicted a US Airways-Delta merger could close by June 30, 2007, roughly when Delta had predicted emerging from bankruptcy alone.

Parker called the proposed merger schedule "aggressive," but said he believes it can be done, although his airline is still working through last year's merger of America West and the old US Airways.

Although that deal closed 15 months ago, the new, combined US Airways is still flying with two separate reservation systems and two sets of pilots and flight attendants who are scheduled separately and who work under separate labor contracts.

Parker and US Airways President Scott Kirby said they would finish merging America West and the old US Airways before beginning a merger with Delta.