Wednesday, November 15, 2006

US Airways (LCC) Proposes $8B Merger with Delta Air Lines

US Airways Group, Inc. (NYSE: LCC) made a merger proposal to Delta Air Lines, Inc. (OTC: DALRQ) under which both companies would combine upon Delta's emergence from bankruptcy. The proposal would provide approximately $8.0 billion of value in cash and stock to Delta's unsecured creditors. Delta creditors would receive $4.0 billion in cash and 78.5 million shares of US Airways stock with an aggregate value of approximately $4.0 billion based on the closing price of US Airways' stock as of Nov. 14, 2006.

US Airways believes that the combination will generate at least $1.65 billion in annual synergies, including $935 million in network synergies, predominantly from optimization of the airlines' complementary networks, including rationalization of network overlap, which will result in a 10 percent reduction of the combined airlines' capacity, reducing unprofitable flying and improving the mix of traffic. In addition, $710 million in net cost synergies will be achieved by combining facilities in overlap airports and eliminating redundant systems and overhead. Significantly, the opportunity to generate more than half of these synergies could be lost if a merger is delayed until after Delta emerges from bankruptcy. The merger is expected to be accretive to US Airways' earnings in the first full year after completion of the merger.

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