Boeing Could Be Hurt By Delta Airlines Takeover – US Airways Is Customer of Airbus – Chief Says No Anti-Trust Problems

Boeing Could Be Hurt By Delta Airlines Takeover – US Airways Is Customer of Airbus – Chief Says No Anti-Trust Problems

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US Airways has launched a multi-billion dollar hostile bid Wednesday to take over rival Delta Airlines which would make the airline the nation’s largest. Many analysts say the takeover could be bad for both consumers and American business. If the takeover / merger goes through, US Airways would handle one in four airline seats in the US according to a report from NBC.

American business could suffer because of the merger. Delta has been a longtime customer of the Washington based Boeing Company. US Airways is a key North American customer of Airbus and has already ordered the Airbus A350 that will compete against the Boeing Dreamliner. The Seattle Post Intelligencer reports that Delta is expected to order Boeing's new 787 Dreamliner. This deal could wipe-out that deal.

Although the company has been in bankruptcy since September of 2005, this is US Airways second attempt to takeover Delta in 18 months. The Financial Times reports that Delta has pledged to emerge from bankruptcy as an independent company. After Delta chairman and chief executive, Gerald Grinstein, rebuffed their competitor’s offer, US Airways began to appeal directly to Delta’s unsecured creditors.

Doug Parker, US Airways chairman and chief executive, insisted that Delta's executives would be forced to hold talks as the premium offered to creditors was superior to their existing plan. "We have put a proposal to them that would be better than anything else, certainly their own plan [and as a result] we will get management support," Mr. Parker told the Financial Times.

Using Delta’s strength in Atlanta and New York, US Airways says the purchase could help them undercut the price offered by international rivals such as Air France-KLM and Lufthansa.

US Airways expects to close the deal by mid-2007 when Delta expects to emerge from bankruptcy protection. Parker insists that this deal would not interfere with US antitrust laws because of the recent rise of low-cost carriers in the US.

The Times reports that US Airways' cash and stock proposal represents a 25 per cent premium over the pre-announcement value of Delta creditors' claims, which rose more than 40 percent on Wednesday as US Airways' own stock price climbed 15 per cent to a record $58.42.

By John Waters
Best Syndication Business Writer



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