Delta is ready for creditors dogfight

Delta Air Lines Inc. will tell its bankruptcy creditors today why they should reject a hostile $8.67 billion merger bid from US Airways Group Inc., three people familiar with the meeting said.

Delta executives also will share details of the airline's plan to exit Chapter 11 without a partner, said the people, who asked not to be named because the talks are private.

The meeting in New York will mark the latest effort by Delta, the third-largest U.S. airline, to win support from its nine-member creditors committee. Atlanta-based Delta, which operates a hub at Salt Lake City International Airport, and US Airways both want the panel's backing because the committee will help set terms of any plan for Delta to leave bankruptcy.

"Delta's being aggressive here because the burden of proof is still on US Airways," said Roger King, an analyst for bond-research firm CreditSights Inc. in New York.

The creditor group met with Delta and US Airways executives on Nov. 30 and Dec. 1 to discuss the competing plans for Delta. The committee has no meetings scheduled with US Airways, based in Tempe, Ariz., although panel members are interested in more talks, two of the people said.

Separately, lawyers for an informal committee of nine of Delta's largest bondholders have met with US Airways to discuss the merger bid, said Alan Kornberg, counsel for the panel. Debt holders including Deutsche Bank Securities Inc. and Lehman Brothers Inc. organized because Delta's creditors committee didn't adequately represent them, Kornberg has said.

US Airways, the seventh-largest U.S. carrier, went public on Nov. 15 with an offer of $4 billion in cash and 78.5 million US Airways shares to merge with Delta after the bankrupt carrier rebuffed an earlier overture.

US Airways declined to comment on any meetings in the takeover effort. Delta didn't immediately respond to a request for comment.

Delta will file its reorganization plan as soon as next week, the people said. The carrier has been working to trim expenses and generate new revenue since seeking bankruptcy protection in September 2005 and says creditors and employees would benefit more if it stays independent.

King said he doubted the creditors would approve a plan for Delta to remain a standalone airline "because there are enough bondholders out there who believe in the synergies that could be won by a merger."

US Airways, which merged with America West Holdings Corp. 15 months ago to end its own bankruptcy, has said it can squeeze $1.65 billion in annual savings over two years from combining the two carriers. US Airways' strategy requires completing a merger while Delta is still in Chapter 11.

A merged US Airways and Delta would surpass AMR Corp.'s American Airlines as the world's largest carrier. It would have 18 percent of the U.S. airline industry's capacity.

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Contributing: Jeff St. Onge; Eric Torbenson