The proposed hostile takeover of Delta ( DALRQ) has won big on Wall Street, but it never gathered much backing on Main Street. The effort by US Airways ( LCC) to take over its biggest competitor has won little support aside from the bankers working on the deal. Delta's management, which opposed the buyout from the start, won the battle for public opinion. A key was 16 "Keep Delta My Delta" rallies it backed around the country, not only in big cities like Atlanta and Washington, but perhaps more importantly in places like Baton Rouge, La., Butte, Mont., Columbia, S.C., and Jackson, Miss. A Senate Commerce Committee last week hearing on airline consolidation in general and the potential merger of Delta and US Airways in particular was a culmination of Delta's efforts. The hearing was packed with uniformed Delta pilots. No one in attendance, outside of US Airways CEO Doug Parker and Andrew Steinberg, assistant secretary for the Transportation Department, voiced support for industry consolidation. Sen. Trent Lott, R-Miss., told Parker: "I must say you are an aggressive suitor. But the lady from the South -- Atlanta -- doesn't seem to want to be forced into this shotgun wedding." Another senator asked whether the money being spent on the merger could instead be spent on employee pensions. A telling moment came when Sen. Claire McCaskill, D-Mo., related how many middle-aged flight attendants, most of them her constituents, lost their livelihoods because of the merger between TWA and American Airlines ( AMR). "I have a great deal of angst over what has happened to the former TWA employees," McCaskill said.
Parker, who sought to explain dispassionately why American and its unions had acted as they did toward the TWA workers, seemed to be put into the position of defending what happened in that deal. However, the congressional reception was a far cry from the Wall Street reception. To pay for the deal, US Airways got $7.2 billion in debt financing from Citigroup. Then Morgan Stanley joined in. US Airways CFO Derek Kerr said the two firms "reinforce the financial community's confidence in the value creation of our proposed merger with Delta" and suggested a third firm might also take part. After the merger announcement, Delta's bonds shot up. US Airways shares surged. Even Delta's shares, which are essentially worthless, climbed. To be sure, the deal is not dead. The creditors could choose to go along, although recent reports suggest that is unlikely. The Justice Department can approve the proposal, even if Congress is opposed, although the Bush administration would have a lot of explaining to do. Now, a report in The Wall Street Journal is saying US Airways might lift its bid by $1 billion. Considering Delta's past stance it's questionable as to whether that would matter. In a recent interview, Lee Moak, chairman of the Delta chapter of the Air Line Pilots Association, said the US Airways bid for Delta had triggered a battle between Wall Street and Congress. "Wall Street types say it is simply a financial transaction and it is the American way," Moak said in an interview. "But in the Senate, what comes out of there is 'Are we going to let Wall Street set public policy on airlines?' " It appears that question is close to being answered.