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US Airways Makes Bid for Delta

November 15, 2006

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In another sign of increasing consolidation in the airline industry, US Airways has proposed to purchase bankrupt rival Delta for $8 billion. US Airways said it would retain Delta's name.

A combination of US Airways and Delta would create one of the world's largest airlines, providing major competition in the lucrative trans Atlantic market. US Airways said it would also be uniquely positions to compete with discount carriers.

Delta has thus far made no formal response to US Airways' overture, raising the possibility of a hostile takeover bid.

The airline is offering Delta's creditors $4 billion in cash and 78.5 million US Airways shares worth an estimated $4 billion. The deal would take place after Delta emerges from Chapter 11 bankruptcy protection.

US Airways said it believes it can generate $1.65 billion of annual cost savings, including savings from eliminating overlaps and cutting combined capacity by 10 per cent. For consumers, that would translate into fewer flights on routes that the airline deemed unprofitable.

The company said it also expects that combining airport facilities such as check-in desks and IT systems would generate a further $710 million of cost savings.

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