It's becoming progressively more difficult for Delta Airlines to ignore -- or even reject -- US Airways' (NYSE:LCC) hostile buyout offer. But that doesn't seem to have dimmed Delta's determination to emerge from bankruptcy as an independent airline.
Yesterday, an unofficial committee of unsecured Delta creditors urged their official counterparts to consider US Airways' sweetened $10.2 billion offer for its Atlanta-based rival. That offer, tendered earlier this month, followed an initial bid of $8.5 million in mid-November. When it spurned the initial offer, Delta management valued the company at as much as $12.2 billion.
In urging the official creditors to push Delta to consider the US Airways offer, the committee of their unofficial brethren asserted that creditors should get to decide whether the airline reorganizes as a stand-alone entity or pursues what it called the "viable alternative" of the US Airways bid. The unofficial committee also asked that Delta's management provide due diligence access to US Airways, and that Delta agree to a 30-day continuance of the disclosure statement hearing.
Meanwhile, US Airways may be willing to increase its latest offer by yet another $1 billion, under certain conditions, in order to win support from the Delta creditors. The second offer, which expires Feb. 1, depends on a postponement of Delta's bankruptcy hearing, scheduled for next week, along with creditors' support for the initiation of a formal antitrust review.
In a bankruptcy court filing last week, the city of Los Angeles said that Delta's reorganization plan can't be approved because it gives the company excessive authority to reject certain leases. The Los Angeles petition joins similar objections issued by Denver, Palm Beach County, Fla., and the operator of a Puerto Rico airport.
As the plot thickens at Delta, the Chapter 11 shuffle continues in Minneapolis, where a hedge fund that owns 5% of bankrupt carrier Northwest has contended that the airline should adopt a more shareholder-friendly reorganization plan. The plan Northwest filed Jan. 12 would leave nothing to current shareholders.
In a sense, the bankruptcy tribulations of Delta and Northwest are only a sideshow to the market strength of other carriers, thanks partly to the recent slide in crude oil prices. Shares of American (NYSE:AMR), for instance, dipped below $28 as recently as early November, but closed Monday at $37.86. Similarly, United (NASDAQ:UAUA) saw its shares trade below $35 within the past 90 days, only to close Monday at $45.03. And while Southwest (NYSE:LUV) shares have lost about 7% of their altitude on a midmonth earnings dip tied to fuel costs, I continue to consider the airline a solid investment for aviation-inclined Fools.
Enjoy the two-ring circus being provided by Delta and Northwest, but if you're seeking solid investment opportunities, consider their three stronger competitors instead.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions.
