US Airways to buy Delta for $8 billion

US Airways on Monday offered to buy Delta Airlines Inc. for $8 billion in an effort to create world's largest airlines. Delta airlines is approaching bankruptcy according to reports. The deal will come through in part cash and part stock.

The Delta Airlines will get $4 billion in cash and 78.5 million shares of US Airways stock of an aggregate value of about $4 billion. The US Airways, which has lined up $7.2 billion in financing through Citigroup, says it can cut costs by $1.65 billion -- but only if the deal moves ahead in the near future.

The head of the US airways Mr Parker told Gerald Grinstein, Delta's chairman that there would be major job losses, though he did not say that the unions have been consulted. This merger would result in making the new formed company the largest trans atlantic carrier. Delta is currently the third largest airline operating in the US, while the US airways is the 7th largest.

Delta, which is currently under bankruptcy protection since September 2004, has already cut down its network and shed 12,000 staff while in protection. All the major US airlines have lost close to $50bn and shed 200,000 jobs since 2001 as the air fare competition combined with high costs and debt pushed United, Delta, Northwest and US Airways, all major US airlines – twice into bankruptcy protection.

The fact that Delta is currently operating in bankruptcy makes the deal more complicated. But a US Airways spokesperson on Wednesday said that a merger with Delta, could lead to lower fares at the merged airline. He said that the deal could finalize in the first half of 2007, and also the merger would need to occur while Delta was still in bankruptcy.

Reports say that Delta is not in favor of any deal but Parker, who was the head of the former America West and then completing a purchase of US Airways an year back, said he's confident that he'll be able to convince Delta management and its share holders, the value of the deal. US airways says that it will keep the name of Delta Air as it has a higher credibility.