US Airways has raised its offer for bankrupt carrier Delta Air Lines to $10.2 billion dollars. This comes after Delta’s rejection last month of an $8 billion-dollar bid.

The new offer aims to persuade Delta’s creditors, who play a key role in bankruptcy proceedings, to accept a merger instead of Delta management’s plan to emerge from creditor protection on its own.

Under the revised proposal:
  *  Delta’s unsecured creditors would receive $5.0 billion in cash and
89.5 million shares of US Airways stock.

  *  When applying the same valuation methodology and assumptions as
described in Delta’s Disclosure Statement, US Airways’ advisor
Citigroup estimates this new proposal will provide between $12.7 and
15.4 billion in value to Delta’s unsecured creditors, which represents
a significant premium over the $9.4 to 12.0 billion valuation that
Delta places on its stand-alone plan.

  *  Based on the closing price of US Airways stock as of Tuesday,
Jan. 9, 2007, the new proposal has a current market value of
approximately $10.2 billion.

The merger is expected to be accretive to US Airways’ earnings per share in the first full year after completion of the merger.

The increased offer is set to expire on Feb. 1, 2007 unless there is affirmative creditor support for commencement of due diligence, making the required filings under Hart-Scott-Rodino, as well as the postponement of Delta’s hearing on its Disclosure Statement scheduled for Feb. 7, 2007.

US Airways has committed financing from Citigroup and Morgan Stanley for the proposed transaction for $8.2 billion, representing $5.0 billion to fund the cash portion of the offer and $3.2 billion in refinancing existing obligations at both US Airways and Delta.

US Airways Chairman and Chief Executive Officer Doug Parker stated, “While our original proposal offered substantially more value to Delta’s unsecured creditors than the Delta stand-alone plan, we are making this revised offer to eliminate any doubt that a merger with US Airways offers Delta’s unsecured creditors significantly more value. Without the support of the creditors, our offer is set to expire on Feb. 1. It is time for this process to move forward. We continue to believe that this is the right time to create a better airline that provides more choice to consumers, increased job security for both airlines’ employees and generates more value for all of our stakeholders.”

According to US Airways, consumers across the nation will benefit from greater choice and lower fares from the “New” Delta. Since the combination of America West and US Airways in 2005, US Airways has lowered leisure and business fares by up to 83 percent in about 1,000 markets. Every domestic destination served today by either US Airways or Delta will continue to be served by the New Delta, which will provide consumers across the nation access to a larger network that connects them to more people and places.

They also claim that employees also will benefit from working for a larger and more competitive airline. As US Airways has already announced, frontline employees of the New Delta will move to the higher cost structure of the combined airlines, and there will be no furloughs of frontline employees of either Delta or US Airways. The combination of US Airways and America West, which was accomplished without any involuntary mainline furloughs despite capacity reductions of 15 percent, demonstrates that a merger can be in the best interests of employees, not just shareholders.

“This is a transaction that makes sense for US Airways stockholders, Delta creditors, the employees and customers of both companies, and the communities that we serve,” said Parker.

The revised US Airways proposal retains the same conditions as the original offer and is conditioned on satisfactory completion of a due diligence investigation, which the Company believes can be completed expeditiously, approval by Delta’s Bankruptcy Court of a mutually agreeable plan of reorganization that would be predicated upon the merger, regulatory approvals, and the approval of the shareholders of US Airways.
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