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Last Updated: Wednesday, 15 November 2006, 19:42 GMT
Delta 'cautious' over $8bn merger
Delta Air Lines planes
The combined firm would operate under the Delta name
Delta Air Lines has responded coolly to a proposed $8bn (4.2bn) merger with rival US Airways.

Delta said it would study the terms of the proposed deal, which would create one of the world's largest airlines.

But it said it planned to emerge from bankruptcy protection next year as a "strong, stand-alone carrier".

Shares in the two airlines, which have suffered severe financial difficulties in recent years, both rose sharply after the news emerged.

Different objectives?

Under the terms of the proposed deal, both airlines would combine once Delta emerged from bankruptcy protection in February.

The cash and stock offer would give Delta's unsecured creditors $4bn in cash and 78.5 million shares of US Airways stock.

We received a letter from US Airways this morning and will, of course, review it
Gerald Grinstein, Delta chief executive

If the deal goes ahead, the airline will operate under the Delta name.

But Delta said its priority was emerging from bankruptcy protection as a stronger, more competitive airline.

"We received a letter from US Airways this morning and will, of course, review it," said Delta chief executive Gerald Grinstein.

"Our (reorganization) plan is working and we are proud of the progress Delta people are making to achieve this objective."

Troubled past

A merged airline would serve more than 350 destinations across five continents and, according to US Airways, be the biggest carrier across the Atlantic.

US Airways said it hoped the combined airline would generate annual synergies of at least $1.65bn.

US Airways jet landing at Regan National Airport
US Airways recently joined forces with America West

"This appears to be sort of a hostile takeover," Roger King, a CreditSights analyst, said.

"US Airways is appealing directly to the creditors."

Delta Air Lines filed for Chapter 11 bankruptcy protection in 2005, amid high fuel prices and cut-throat competition.

In December, pilots at Delta voted to approve a 14% pay cut to help keep the firm trading.

US Airways was itself formed from the merger last year of the struggling airline of the same name and smaller rival America West.

US Airways results beat forecasts
21 Feb 06 |  Business
Delta pilots agree to 14% pay cut
28 Dec 05 |  Business
US Airways and America West merge
28 Sep 05 |  Business
Delta to shed up to 9,000 workers
22 Sep 05 |  Business
Delta is 'close to bankruptcy'
12 Sep 05 |  Business

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