Monthly Archives: December 2006

When Mergers Are More Than Just Numbers


Listening to Delta Air Lines’ CEO Jerry Grinstein this morning, one could not come away from his comments with any other impression but one. The man does not want to be the one saddled with “Sold Delta Down the River” on his tombstone.

Not that we didn’t already know this. After all it was Grinstein and company who, arguably, waited too long to take Delta into bankruptcy in the first place.

In both cases I think one can throw away the spreadsheets and the “what is the rational thing to do” arguments.

No, as I wrote two weeks ago in PBB, this situation with Delta has become far too much about emotion and ego. And nowhere was that more evident than in the comments of Delta’s CEO this morning.

Case in point? “US Airways is the worst possible merger partner.”

Given the current airline financial environment, I don’t think I would be saying things like this publicly. Those words could come back to haunt him.

One thing is for sure. I don’t think Doug Parker is on Jerry’s Christmas card list.

This morning Delta revealed its restructuring plan for its escape from the jaws of bankruptcy. The airline filed a five-year business strategy with the U.S. Bankruptcy Court in New York, 15 months after seeking Chapter 11 protection.

In its filing, Delta said it will leave bankruptcy in the first half of next year, and forecast net income of about $450 million in 2007 and $1.2 billion in 2010.

Delta said its plan would let unsecured creditors recover 63% to 80% of their claims, and that Blackstone Group, a financial adviser, estimates the airline’s value at $9.4 billion to $12 billion.

also estimated that its operating margin would move from a negative 6.9% this year to 2.4% in 2007 and 10.5% by 2010. CASM will fall to 6.73 cents in 2007, down 20% from 2004, CFO Edward Bastian said on this morning’s call.

So where does all this put us? Delta has gone public with its restructuring plan, which looks, not surprisingly, a little optimistic or aggressive (take your pick) in terms of what it expects to do on the revenue front in the next year or so. On the other side of the fence, I think the airline is also underestimating the potential effect of a potential merger.

Nothing we wouldn’t expect them to do.

But contrary to what some people think — even though this plan has now been filed, and even though the Jerry Grinstein-led board of directors has said “no” to a potential deal with US Airways — the real power here still lies with the airline’s creditors committee.

I will be very surprised if the committee does not vote this week to allow US Airways to proceed with the necessary due diligence it has to do in order to firm up its bid for Delta.

Then again, now that Delta has shown its hand with its restructuring plan, this could also open the door to other airlines who might be thinking about making a bid.

Bottomline — we’re not done here yet. Not by a long shot.

We’re Coming….We’re Coming…

PBB will be posted later today, as I advised yesterday. No problems with backhoes, electricity, or lack of connectivity today. Ah, hey, it’s just another week in post-Katrina paradise. Woo hoo.

But while I am waiting on some final edits to PBB to be completed, I wanted to pass this along. I know, I know. It’s that time of year, and we’re getting all kinds of “holiday” messages of one kind or another. Some are dumb. Some are funny. But this one, which was forwarded to me by a photographer friend, hit the spot. It’s well done. it’s silly. Nice way to waste a couple of minutes of time. Will put you in the holiday frame of mind, too!

Click here to have Santa and the reindeer serenade you.

Okay, off to the mines. Talk to you again soon!

PBB Posting Update: Friday


Well folks, the local efforts to upgrade our infrastructure here in the swamp continue. I guess long term that is good news, as it’s only been 16 months since that wench Katrina decided to visit. But short term, the rebuilding efforts continue to stymie our efforts to get this week’s issue of PlaneBusiness Banter posted.

We were offline again this morning for 2-3 hours as the electric company came back for more work — and it looks like we may be pushed offline again this afternoon. Apparently their new 1200 pound transformer is still not working quite right.

As a result — rather than going nuts or screaming at the cats and the dog — I’ve decided to remain calm. Trust me. It’s not easy. But, it’s an acquired trait I’ve developed after having lived through the last 16 months.

So — PlaneBusiness Banter subscribers — look for this week’s issue to be posted Friday.

AirTran Investor Presentation


For those of you with enquiring minds who would like to read through AirTran’s investor presentation regarding its offer to Midwest Airlines, you can download the presentation here. It is a PowerPoint file. (.pps)

Tickers: AAI:NYSE.

Speaking of Mergers — This One Looks Like A Done Deal

Qantas Logo2-1

MarketWatch reports that Australian flag carrier Qantas has agreed to the proposed private A$11 billion ($8.65 billion) takeover offer it recently received.

The deal is led by an investor group that includes the Macquarie Bank and the Texas Pacific Group.

MarketWatch cites a report in the Australian newspaper saying that Qantas agreed to the deal after it was sweetened by 10 cents a share. Qantas’s non-executive directors earlier said a $5.50 per share cash bid by the consortium was not acceptable, citing the complex terms of the offer. According to the report the directors were not happy with the overall bid price but also with the $100 million break-up fee if the deal failed to go through. Most of the conditions have been changed to placate Qantas directors, the Australian said.

We’re Back and Just in Time


Please excuse our absence the last day or so. It all started when the electric company showed up with a backhoe yesterday morning to do some “work” on their new transformer they installed about three weeks ago. Yes, well, the problem is that all our utilities come into the same general area in our back yard — and yep, not 10 minutes after the backhoe started its noisy thing, we had no telephone lines and hence, no high-speed connectivity. Both lines were ripped out of the ground.

Searching television last night, I was satisfied that nothing earth-shaking had occurred with the things with wings.

Just goes to show you how much coverage the sector gets — when it doesn’t involve a crash.


This morning I was struck dumb to hear a report on Good Morning America in which they were discussing whether or not a Continental/United Airlines merger would be completed before the Christmas travel rush, and if so, what that would mean to travelers.

What the hell?

Finally, after BellSouth came and rewired us, I was once again able to get back online and get up-to-date. Then what did my wondering eyes feast upon but the news that AirTran is going after Midwest Airlines. 24 hours offline and look what happens.

According to the WSJ,

“Meanwhile, AirTran in the next few days is expected to publicly disclose a recent $200 million offer made to Midwest’s management. The proposed deal would award shares $11.25 each in cash and stock, representing a 24% premium to where the company’s shares traded yesterday. has been pursuing Midwest for over a year, people familiar with the matter say, but was rejected in its most recent approach earlier this month.”

Actually that premium would be more like 38% by our calculations.

Are we surprised? No. Looking at potential US Airways/Delta and United/CAL deals in the works — you have to assume that Frontier, AirTran, and Midwest are wondering if their smaller niches business plans are not somewhat in jeopardy.

However it appears at this point, Midwest is less than enthusiastic about AirTran’s overtures.

As for the Continental/United hoo hah, there is really nothing new here. We all know both airlines have been talking for months. We know that United has also kept talking to Delta, in an effort to keep their “options open.”

And no, contrary to rumors that took off like crazy late Monday, United CEO Glenn Tilton did not announce anything concrete at the airline’s investor conference Tuesday. Then again, considering it’s been years since the airline even held an investor conference, I can understand why some might have thought there was going to be more to the event than turned out to be the case.

But Tilton and Co. aren’t stupid. The heightened speculation and the “leaks” that the two are talking that have come out in the last day or so have caused shares of both airlines to soar. Both stocks are already up more than 5% in trading today.


Sabre Apparently Set to Go Private

Sabre Holdings Logo

Reports in both the Wall Street Journal and the New York Times this morning indicate that Sabre Holdings may announce as early as this week that it has agreed to be taken private.

Citing unnamed sources, the papers indicated Sabre could be valued at more than $4 billion, a premium on its current market capitalization of about $3.7 billion.

The Journal reported the most likely suitors as being private-equity groups, but also mentioned Amadeus as a potential player.

According to the Times, “The bidding group favored to win the auction includes Silver Lake Partners and Texas Pacific Group; a rival bidding group is led by Apollo Group. The people involved in the talks said a third group of investors is also considering a bid.”

It’s About Time


Only after the ICAO passed a change that will allow the vast majority of pilots in the rest of the world to fly until they are 65, and only after a hand-selected FAA committee failed to offer up a recommendation last week — reports Monday say that FAA administrator Marion Blakey has apparently “seen the light” and is now going to push for the retirement age for pilots of U.S. carriers to be extended to age 65.

According to today’s Wall Street Journal,

“According to people familiar with the situation, FAA Administrator Marion Blakey is crafting the new position slowly but steadily. Before spelling it out publicly, she is expected to gauge the willingness of incoming Democratic leaders in Congress to take the lead in advocating such moves. Input from the White House and Department of Transportation could affect the agency’s actions. Bills calling for the policy shift failed to pick up enough traction this year. A spokeswoman for Ms. Blakey said the industry can “expect a decision relatively soon.”

Finalizing new regulations could take 18 months or more, but FAA lawyers are mulling over whether to apply the new standard to currently retired pilots between 60 and 65, according to one person familiar with the process. Seniority rules could make it extremely difficult to make any change retroactive.”

About time. Whether it is done as part of an FAA rule change, or a Congressional effort — this changemakes sense on too many levels for it not to be completed.

A Little Slow Today; But Saints Rock


Hi guys. It’s Monday. Ordinarily, after such a spectacular drubbing of the Dallas Cowboys at the hands of the New Orleans Saints as we witnessed last night, chances are you would have found me in here last night — celebrating.

Alas, the ugly stuff I had early last week and thought I was over, came back with a vengeance this weekend. As a result, I am one puny, but happy, Saints fan today.

Yes, just as I predicted here last Monday — the Saints beat the Cowboys last night. But I’ll admit. I never thought they would totally rip them to shreds. This was definitely an added bonus. Even though my head hurt every time I yelled at the TV screen — it was okay. There are just some things you have to work through — you know?

Now that I’ve sent appropriately snarky emails to many of my Dallas friends, it’s time to start trolling the airline haunts to see what’s up. Enough football frenzy.

BuzzBomb? We just received some info this morning on that. Still working. We’ll post that info — hopefully today. Unless I decide to crawl up into a ball and not move. Which doesn’t sound like a bad idea.

Go Saints.