Delta Creditors Hires Retired Continental CEO

Dec. 23--Gordon Bethune, Continental Airlines' colorful retired chief executive, is being hired to advise Delta Air Lines' key creditors committee as it weighs competing proposals for control of the carrier.

Bethune -- who was involved in merger talks with Delta when he led Continental -- will advise the court-appointed unsecured creditors committee on the merits of Delta's stand-alone reorganization plan vs. US Airways' merger offer.

The committee hired Bethune "because of its pressing need to retain an airline industry expert and consultant with broad experience as a senior executive at a major international carrier," the committee said Friday in a bankruptcy court filing.

Bethune will be paid a $250,000 consulting fee plus expenses for every 10 days' worth of work he does for the committee, if the agreement is approved by Delta's judge.

Delta executives filed a reorganization plan this week to emerge next spring from bankruptcy as an independent carrier valued at up to $12 billion. US Airways last month submitted an $8 billion-plus proposal to buy Delta, take its name and create the world's biggest carrier.

The committee said Bethune, "widely recognized as one of the most accomplished and successful executives in the airline industry," will be involved in helping the creditor committee analyze the proposals, as well as other potential merger partners or alternatives.

Bethune, 65, was credited with transforming Continental from a perennial basket case into an industry overachiever during his decade at the helm, which ended in 2004.

During that time, Delta and Continental had at least three reported rounds of talks about a possible merger.

The most serious came in 1998, when Delta -- at the time flying high financially -- made a $3 billion bid for Houston-based Continental. It was rejected in favor of a marketing alliance with Northwest Airlines, and that later morphed into a three-way deal including Delta.

While not widely known beyond the airline industry, Bethune has been one of its more colorful executives. A one-time mechanic, he cultivated an image of a populist CEO who rode motorcycles for fun and tossed off blunt and often profane sound bites.

"You only need about a sixth-grade math education to be a good airline executive," he said in a 1998 interview. "It's the ethereal guys who screw the place up."

His arrival on the scene puts him in the middle of a dogfight.

After Delta filed its reorganization plan this week, Delta and US Airways executives traded shots in dueling appearances and conference calls.

Delta claims its offer is more valuable to creditors, that a merger would never be approved by antitrust regulators and that it would be unworkable even if approval came. US Airways executives retorted Thursday that Delta's valuation and financial projections for a stand-alone Delta are "way out of whack" and overstate regulatory and other obstacles.

Both the court-appointed committee and another unofficial creditors group welcomed Delta's plan but said they wanted to look at alternatives that might produce bigger returns for creditors.

As a result of Delta's Chapter 11 filing last year, creditors are effectively the main owners of the airline, and they must sign off on whatever final exit plan Delta presents to its judge.

In a statement Friday, the unofficial group of hedge funds and other creditors said it looks forward to discussing Delta's proposal and discussing "the assumptions upon which it is based."

The group, which calls itself the Unofficial Committee of Unsecured Claimholders, said in a written statement that "it expects Delta to consider methodically, proactively and fairly strategic alternatives to its proposed stand-alone Chapter 11 plan to ensure that creditor recoveries are maximized in the Chapter 11 process."

The group says it has amassed $2.25 billion of Delta's unsecured claims, or about 15 percent of the total expected claims and votes. A winning reorganization plan must be approved by both a majority of creditors and those representing two-thirds of all claims.

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