Delta snubs US Air in bankruptcy plan

Delta Air Lines Inc. filed a reorganization plan Tuesday that called 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 had formally rejected US Airways Group Inc.’s $8.5-billion hostile takeover bid, and its executives joined rank-and-file employees in a full-scale public relations assault against the deal.

“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 Chief Financial Officer Ed Bastian said in a conference call Tuesday that Delta had not received any other offers.

Delta outlined a five-year business plan. Its advisors estimated that a reorganized Delta would have a consolidated equity value of $9.4 billion to $12 billion and that Delta’s unsecured creditors would recover about 63% to 80% 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 shares fell 9 cents to $1.38.

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 has not decided whether to give creditors any cash.

US Airways’ offer included $4 billion in cash and 78.5 million shares of US Airways stock.

Tempe, Ariz.-based US Airways issued a statement saying it remained committed to its buyout proposal. It said it believed that its offer, including $1.65 billion in anticipated cost savings, provided more value than Delta’s plan.

“We remain a disciplined and determined bidder for Delta,” US Airways Chief Executive Doug Parker said.

An official with knowledge of US Airways’ plans who spoke on condition of anonymity because of the sensitivity of the talks said Monday that US Airways was willing to increase its offer if Delta could justify a higher price. But Delta said Tuesday that it believed that flying solo was the best proposal.

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.

After falling for most of the day, US Airways shares rose $1.70 to $57.50, putting the value of its bid for Delta at $8.5 billion.