US Airways Bids To Acquire Delta And No. 1 Rank

Analysts cautioned, however, that a US Airways-Delta deal faces many hurdles. US Airways hasn't yet fully digested its last merger; it hasn't even finished painting all of its America West jets in the new company colors.

Delta's chief executive brushed off attempts by Parker to discuss a merger this fall, according to letters exchanged between the two men.

In a statement yesterday, Grinstein said his airline's "plan has always been to emerge from bankruptcy in the first half of 2007 as a strong, stand-alone carrier. Our plan is working and we are proud of the progress Delta people are making to achieve that objective."

Grinstein said in yesterday's memo to employees: "I've said before and continue to believe that the history of mergers in the airline industry is almost always one of failure."

Faced with that resistance, Parker sidestepped Delta's management yesterday and made a direct pitch to its creditors. The offer totals $4 billion in cash and 78.5 million shares of US Airways stock. If creditors like the deal, they could approach Delta management and encourage them to consider it.

Regulators also may question the bid. The new airline would probably have to shed one of its lucrative shuttle routes between Washington, New York City and Boston, US Airways executives acknowledged.

The Justice Department, which would scrutinize any potential merger, might also force the airline to eliminate some of its East Coast hub airports. The airline would have major operations at pairs of neighboring hubs, such as those in Charlotte and Atlanta, and New York and Philadelphia.

Antitrust lawyers said the Justice Department would focus on whether the proposed merger might diminish competition and harm consumers. Six years ago, the department seemed ready to challenge a proposed merger between US Airways and United Airlines before it fell apart.

But the emergence of low-cost carriers and Delta's struggles in bankruptcy may change the view of the department's lawyers, said Bill Bayer, an antitrust lawyer and a former head of the Federal Trade Commission's antitrust division.

"The market has obviously changed in six years," Bayer said, but questions remain about whether "it has changed to the point where the cost savings from combining these two carriers will outweigh the risks to consumers and competition."

If the airlines reach a deal, it will also probably be studied by the new Democratic Congress next year.

Rep. James L. Oberstar (D-Minn.), the ranking Democrat, and likely future chairman, on the House Transportation and Infrastructure Committee, said he would probably hold hearings on such a merger.

"A combination of carriers of this magnitude should be scrutinized in the public domain," Oberstar said.