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Delta 'cautious' over $8bn merger | |
(about 3 hours later) | |
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. | 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. | 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 said it hoped the combined airline would generate annual synergies of at least $1.65bn. |
US Airways recently joined forces with American 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. | 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 American West. | US Airways was itself formed from the merger last year of the struggling airline of the same name and smaller rival American West. |