Delta Air Lines officially rejected an $8bn (£4.05bn) merger with US Airways, proposing instead a recovery scheme when it emerges from bankruptcy.
Delta wants to emerge an independent carrier
Delta, which aims to emerge from bankruptcy as an independent firm, said the deal proposed in November would be "a poor strategic fit for Delta".
Delta's five-year plan, which needs creditor approval, values the firm up to $12bn - far above US Airways' offer.
US Airways said it remained "a determined bidder for Delta".
Analysts say other airlines could still make an offer for Delta Air Lines.
"Every carrier is studying every other carrier all the time, and if the process of consolidation starts, you would not want to be left out, said Delta's chief executive Gerald Grinstein.
Creditors are expected to vote on Delta's latest business proposal around February. The bankruptcy court also has to give its approval for the deal to go ahead.
Delta's latest plan, which includes returning to profitability next year, could mean unsecured creditors would gain between 63% and 80% of their claims.
The firm has yet to decide if creditors would receive any cash.
Delta said a merger with US Airways would be detrimental to Delta's brand and that US Airways' projected $1.6bn yearly savings are overly ambitious.
US Airways cash and stock offer would have provided Delta's unsecured creditors $4bn in cash and 78.5 million shares of US Airways stock.
US Airways was the result of a merger last year between the struggling airline of the same name and smaller firm America West.
Any merger between Delta and another airline would raise antitrust worries due to potential market domination.
High fuel prices and tough competition sent Delta into financial trouble, and in September 2005 it entered bankruptcy protection.