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Delta determined to fly solo

Published December 20, 2006


ATLANTA - Delta Air Lines filed a reorganization plan Tuesday that calls for it to emerge from bankruptcy next spring as a stand-alone company worth as much as $12-billion, or slightly more than the combined market value of the nation's two biggest carriers.

The Atlanta-based company also said that its board has formally rejected US Airways' $8.5-billion hostile takeover bid, and its executives joined rank-and-file employees on a full-scale public relations assault against the merger proposal.

"US Airways is the worst of all potential merger partners," Delta chief executive Gerald Grinstein said during a conference call with analysts.

Grinstein didn't completely dismiss the idea of a merger with a company other than US Airways, saying later Tuesday that Delta would review any other bids. But he said Delta would not put out a "for sale" sign.

Delta's chief financial officer, Ed Bastian, said in a conference call with reporters Tuesday that Delta so far has not received any other offers.

Delta and US Airways were traditionally the biggest carriers at Tampa International Airport but cut flights in recent years amid huge financial loses and competition from discount airlines.

Southwest Airlines is now No. 1 with nearly 26 percent of the market, followed by Delta at 15 percent, and US Airways ranks fourth with 10 percent.

Delta outlined a five-year business plan. Its advisers estimated that a reorganized Delta will have a consolidated equity value of $9.4-billion to $12-billion and that Delta's unsecured creditors would recover roughly 63 to 80 percent of their allowed claims.

The high end of the equity value Delta is projecting would be more than the $11.9-billion in combined market value of AMR Corp.'s American Airlines and UAL Corp.'s United Airlines.

Delta's existing stock would be wiped out under the plan and creditors generally would receive distributions of new Delta common stock to settle their claims. Delta so far has not decided whether to give creditors any cash.

Buyout offer stands

US Airways Group Inc. of Tempe, Ariz., issued a statement saying it remains committed to its merger proposal, adding it thinks its proposal, including $1.65-billion in anticipated cost savings, provides more value than Delta's plan.

"We remain a disciplined and determined bidder for Delta," US Airways chief executive Doug Parker said.

But Delta said Tuesday it believes flying solo is the best proposal for everyone involved.

Creditors must now vote on whether to approve Delta's reorganization plan or any competing plan that may be filed with the court. The plan also must be approved by the court.

Ultimately, the unsecured creditors committee in the bankruptcy case will play a key role in determining Delta's fate.

The committee has not said whether it will support Delta's plan, US Airways' plan or any other offer to buy Delta that may come in.

Delta also said Tuesday that its board has unanimously rejected US Airways' unsolicited offer, disclosed Nov. 15.

Delta employees held rallies at airports serving several cities, including Cincinnati, Boston and Columbia, S.C., protesting US Airways' bid; Delta executives attended a similar rally in Atlanta.

After falling for most of the day, US Airways shares bounced back and rose $1.70, or 3.1 percent, to close at $57.50 Tuesday on the New York Stock Exchange.

Delta said it believes the US Airways deal is not likely to gain regulatory approval. It also cited as obstacles overwhelming labor issues and "flawed economic assumptions."

Delta filed for Chapter 11 in New York in September 2005.

Delta said its reorganization plan calls for rolling its bankruptcy financing of $2.1-billion into a new package that would go into effect when it emerges from Chapter 11, and it said it has received several proposals with competitive terms to help it do that.

There has been no decision about who will lead Delta once it emerges from bankruptcy. Delta's current chief, Grinstein, has said he plans to leave Delta around the time it exits bankruptcy.

[Last modified December 20, 2006, 00:55:43]

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