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Report: Delta weighs bid for US Airways

by Lou Whiteman | Published January 30, 2012 at 10:14 AM

Delta Air Lines Inc. is reportedly weighing a potential bid for US Airways Group Inc., a fresh sign that a new round of consolidation could be brewing among U.S. carriers sparked by the bankruptcy of American Airlines Inc. parent AMR Corp.

Both Tempe, Ariz.-based US Airways and Delta, of Atlanta, have retained advisers to monitor the American Airlines reorganization and to study a potential bid for that Fort Worth-based carrier. The Wall Street Journal reported late Friday that Delta is also considering a deal for US Airways, adding that US Air is open to being a buyer or a seller and is expecting Delta to reach out.

An industry source reached Friday said that all deal talk is preliminary and that the various carriers are currently game-planning potential scenarios with advisers and have not yet engaged in formal merger discussions.

Delta, which bought Northwest Airlines Corp. in 2008, and US Airways are considered two of the more aggressive companies left in the domestic industry. A merger between Delta and either American or US Airways would catapult the resulting entity past the newly formed United Continental Holdings Inc. to become the world's largest airline.

While a Delta-American combination would attract heavy antitrust scrutiny a bid for US Airways, the smallest remaining pre-deregulation carrier, would be an easier deal to get past regulators. But Delta and US Airways do overlap in the Southeast, with Delta operating a large hub in Atlanta and US Airways dominant in Charlotte, N.C., and in the Mountain West region.

US Airways also still has significant labor issues stemming from its 2005 merger with America West Holdings Inc. The company has operated two separate airlines in the years since the deal while pilots continue to squabble over integration issues.

Potential labor troubles were one of the reasons cited for United Airlines Inc. parent UAL Corp.'s decision to abandon talks with US Airways in 2009 in favor of striking a deal with Continental Airlines Inc.

US Airways and Delta have crossed paths in the past. US Air made a hostile $10.2 billion attempt to buy Delta out of bankruptcy in 2006 that was rejected by its target's creditors. The two have been more willing to work together of late, last year winning approval for an asset swap that gave Delta an expanded presence at New York's LaGuardia Airport in exchange for handing US Air additional landing rights at Reagan National Airport in Washington.

US Air has retained has retained Barclays Capital, Millstein & Co. and Latham & Watkins LLP to help it assess options.

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