US Airways Makes $8B Bid for Delta

The Associated Press
Wednesday, November 15, 2006; 3:20 PM

ATLANTA -- US Airways Group Inc. made a hostile $8 billion cash and stock bid for Delta Air Lines Inc. on Wednesday, a deal that would create one of the world's largest carriers. The move came despite Delta's repeated statements it isn't interested in a merger.

The offer to buy Delta once the Atlanta-based airline emerges from bankruptcy protection by the middle of 2007 would give Delta's unsecured creditors $4 billion in cash and 78.5 million shares of US Airways stock. Delta has yet to file its own plan of reorganization.

As it stands now, Delta's common shares are likely to end up worthless when it exits bankruptcy. In most bankruptcy cases, the debtholders usually end up with new shares of the company.

Shares of US Airways rose $2.90, or almost 6 percent, to $53.83 in morning trading on the New York Stock Exchange.

If the deal is completed, the airline would operate under the Delta name and serve more than 350 destinations across five continents. US Airways has not decided where the merged company would be based. The merged company would divest certain assets, including a shuttle that operates in the Northeast. It also said it would optimize flights at its hubs, but did not say what further impacts the hubs could face.

Doug Parker, chief executive of Tempe, Ariz.-based US Airways, said in a telephone interview that he is aware of the comments made by Delta's management in recent months, but he believes this is a fair offer and that ultimately Delta's creditors will see that.

"Delta is in bankruptcy and bankruptcy is a very open process," Parker said. "The process is designed so that the creditors get the highest possible value for their clients. Given that process, what we have done is gone public with an alternative to a standalone plan."

Delta Chief Executive Gerald Grinstein issued a statement saying the carrier would review the proposal, but would push ahead with its goal to file its reorganization plan by Feb. 15. "Delta's plan has always been to emerge from bankruptcy in the first half of 2007 as a strong, standalone carrier," Grinstein said.

The deal would be subject to regulatory, creditor, U.S. Airways shareholder and court approval.

Grinstein said last month that he had received "feelers" from UAL Corp.'s United Airlines about a possible merger 18 months ago, but that he quickly rejected them. He reiterated at the time that Delta has no plans for a merger.

US Airways, the sixth-largest U.S. carrier, also had been reported to be interested in Delta months ago, and it released letters Wednesday showing its previous communications with Delta, the third-largest U.S. carrier.

Parker said a US Airways-Delta combination would have about 85,000 employees. He said he would anticipate flying with 10 percent fewer planes, but that doesn't mean job cuts.

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