Jan. 10 (Bloomberg) -- US Airways Group Inc. raised its hostile takeover bid for bankrupt Delta Air Lines Inc. by 28 percent to $10.2 billion and set a Feb. 1 deadline to spur action by the carrier's creditors.

The new offer consists of $5 billion in cash, up from $4 billion, and 89.5 million US Airways shares, from 78.5 million, the airline said today. Atlanta-based Delta said it would review the bid while noting US Airways didn't address objections to the original Nov. 15 proposal.

US Airways Chief Executive Officer Doug Parker said the bid, which would create the world's largest airline, leaves no doubt that unsecured creditors would get more from his plan than from an independent Delta. The creditors committee controls Delta's fate because it will shape terms for a bankruptcy exit.

``This new offer has a chance to sway creditors in US Airways' favor,'' said Jim Corridore, a Standard & Poor's analyst in New York. ``However, Delta is likely to continue to fight, and creditors thus far have been unconvinced.''

Separately, Delta has held talks with bankrupt Northwest Airlines Corp. about a possible merger, a person familiar with the meetings said. Both airlines declined to comment. The Wall Street Journal reported the discussions earlier today.

US Airways' sweetened bid boosts pressure on Delta to convince creditors to let it stay a standalone company. The panel met today with advisers including Gordon Bethune, a former Continental Airlines Inc. CEO hired to assess both proposals.

Bonds, Shares

Delta's 8.3 percent notes due in 2029 climbed 3.4 cents to 67.4 cents on the dollar, according to Trace, the bond-price reporting service of the NASD.

Shares of Delta rose 10 cents to $1.40 at 4:01 p.m. in New York in over-the-counter trading. Shares of Tempe, Arizona-based US Airways gained $1.03 to $58.93 in New York Stock Exchange composite trading.

The initial Nov. 15 bid was valued at $8 billion, based on the previous day's share price. The increase is attributable to a rise in US Airways' stock as well as the shares and cash added today. The creditors' stake in a combined airline would now be 49 percent, up from 45 percent.

``The feedback we were getting was that they were struggling with this,'' Parker said today in an interview. ``We wanted to make it much easier for them and give them an impetus.''

Parker, 45, boosted his bid two days after Tempe, Arizona- based US Airways met with Bethune and announced that Morgan Stanley would join Citigroup Inc. in financing the takeover offer. The Feb. 1 deadline applies under certain conditions.

Delta Partner?

US Airways' revised bid may prompt Delta to team with another carrier, including Northwest, said Roger King, an analyst at bond-research firm CreditSights Inc. in New York. UAL Corp.'s United Airlines also may be a potential partner, King said in a report.

``Merging with Northwest has potential'' and would allow Delta to stay in control of a combined carrier, King said. ``Northwest wants to be bought out. Both airlines are in similar positions in their reorganizations, but running a plan concurrently through two bankruptcy cases presents unique hurdles.''

United and Continental Airlines Inc. also have discussed a possible linkup.

`Debt Burden'

Delta said in a statement that the revised US Airways proposal ``would increase the debt burden of the combined company by yet another $1 billion'' to the highest level in the U.S. industry. Delta wants to leave bankruptcy by midyear.

A larger, combined airline ``has a lot more debt and makes a lot more money,'' Parker said. ``What matters is the ability to service the debt.''

Parker wants to combine Delta, the third-biggest U.S. carrier by passenger traffic, with seventh-ranked US Airways. He has said a merger would produce $1.65 billion in annual savings and new revenue if it occurs while Delta is in bankruptcy.

US Airways' takeover bid will expire Feb. 1 unless the creditors ask Delta to open its financial records and take steps to permit a U.S. antitrust review of the bid. US Airways also wants the committee to support postponement of a Feb. 7 U.S. Bankruptcy Court hearing on Delta's plan, Parker said.

Blocking Move

The deadline also is designed to block Delta from taking steps under its standalone plan that make it a less attractive acquisition, Parker said. Those moves include a Jan. 4 request by Delta for court approval to buy 30 Bombardier Inc. regional jets to feed passengers to its hub airports.

An unofficial panel representing Delta debt holders urged the airline to take the actions requested by US Airways by Feb. 1. The group, which says its members hold $2.25 billion in unsecured claims, also asked for an official role in considering bids for Delta. The committee isn't recognized by the bankruptcy court.

Since filing for bankruptcy on Sept. 14, 2005, Delta has cut jobs and unprofitable routes and boosted international flights to help return to profit. The carrier listed debts of $28.3 billion and $21.6 billion in assets in its filing.

Delta's five-year business plan values the airline at as much as $12 billion. Using Delta's same economic and cost assumptions, US Airways said its new bid is valued at $12.7 billion to $15.4 billion.

Citigroup and Morgan Stanley have agreed to provide $5 billion in cash and $3.2 billion in refinancing of existing debt at both airlines. The industry is poised to report its first annual profit since 2000 after more than $40 billion in losses by the largest carriers from 2001 through 2005.

Few Options

Delta has few options to revise its proposal since it is part of an overall restructuring plan filed with the bankruptcy court, said George Hamlin, an airline industry consultant in Washington.

``Delta, if it wants to remain independent, has to convince creditors that they can execute on their plan superbly and that it will go off without any questions,'' Hamlin said.

The carrier's employees oppose the US Airways offer, and Delta's Air Line Pilots Association chapter approved $15 million for lobbying and other purposes beyond the ``few million'' it already has spent to fight the merger, union chief Lee Moak said.

``It's an escalation,'' Moak said in an interview. Parker ``upped his offer, we upped our offer. We are going to kill this merger.''

US Airways and Delta both have networks concentrated along the U.S. East Coast, while US Airways also has a West Coast presence. US Airways has major airport operations in Phoenix, Philadelphia and Charlotte, North Carolina; while Delta has hubs in Atlanta, Cincinnati, Salt Lake City and New York.

US Airways has said it will sell one of the carriers' shuttle operations, which provide multiple daily flights among Boston, New York and Washington.

A merger must be approved by the federal antitrust regulators, Delta's creditors and bankruptcy court judge, and US Airways shareholders.

Delta's bankruptcy case is In re Delta Air Lines Inc., 05- 17923, U.S. Bankruptcy Court, Southern District of New York (White Plains).

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

Last Updated: January 10, 2007 20:29 EST