Offers $8 Billion In Cash And Stocks

US Airways Group (USAG) has offered $4 billion cash and 78.5 million shares of US Airways stock to Delta Air Lines creditors in a deal that could create the world's largest carrier.

That offer is 40-percent over the average trading price for Delta unsecured claims over the last 30 days.

Should the merger go forward, the combined airline -- operating under the Delta name -- would serve 350 destinations in North and South America, Europe, Asia and Africa.

USAG formed after US Air's emergence from bankruptcy, and its subsequent acquisition last year by America West. The Associated Press says USAG's offer to buy would come after Delta is out of bankruptcy.

Delta executive vice president of sales and customer service Lee Macenczak told Bloomburg, "The focus of this management team is getting out of bankruptcy, not mergers. We'll have to discuss the US Air offer internally before saying anything more. It's always difficult to see the value of mergers before they actually happen."

SEC filings show the merger was first discussed in a conversation followed up with a September 29 letter between USAG CEO Douglas Parker and Delta CEO Gerald Grinstein. Grinstein replied in an October 17 letter that he and Delta's board "believe it would not be productive to engage in the type of exploratory discussions that you proposed at the time."

Delta and USAG are big on the east coast. They compete in many markets and USAG sees the merger as beneficial to both.

A release on USAG's website says the proposed merger would reduce capacity for both by 10-percent and generate $1.65 billion annually through "optimization of the airlines’ complementary networks, including rationalization of network overlap." The 10-percent capacity reduction will not eliminate any US destinations.

USAG's Parker said, "We believe that the combination of US Airways and Delta, like the US Airways/America West merger we completed in September 2005, is extremely compelling and will create significant value for each of our stakeholders. The combined company will be a more effective and profitable competitor in the current fragmented marketplace, with the ability to better meet the continuing evolution of the airline industry."

FMI: www.delta.com, www.usairways.com