Delta Air Said to Study US Airways Bid in Review of M&A Options

Delta Air Lines Inc. is studying a bid for US Airways Group Inc. as North American carriers assess possible combinations after the bankruptcy of American Airlines parent AMR Corp., people familiar with the matter said.

A potential tie-up with US Airways is only one option under consideration amid a review that may not lead to any offers, said two of the people, who declined to be identified because the discussions are private. Atlanta-based Delta hasn’t approached US Airways, one of the people said.

Delta and TPG Capital also are evaluating possible bids for American, people familiar with the matter have said, and US Airways has confirmed it’s doing the same. American, the third-largest U.S. carrier, filed for bankruptcy Nov. 29 following annual losses that began in 2008.

The filing touched off widespread reviews by U.S. airlines of all their competitors for possible mergers and acquisitions as well as purchases of assets that might be divested in a restructuring, one of the people said.

Delta declined to comment on any consideration of a US Airways bid, citing its policy against discussing rumors or speculation, said Betsy Talton, a spokeswoman. US Airways also declined to comment, said Todd Lehmacher, a spokesman.

US Airways surged 61 percent this year through Jan. 27, while Delta jumped 28 percent as most U.S. airlines advanced.

Following AMR’s bankruptcy, analysts speculated that it might receive an offer from US Airways, and Chief Executive Officer Doug Parker said last week that his company, the fifth-largest U.S. carrier, is evaluating the possibility of such a merger.

‘Value-Enhancing Opportunities’

Millstein & Co., Barclays Plc and the law firm of Latham & Watkins LLP have been hired to help Tempe, Arizona-based US Airways evaluate AMR options, Parker told analysts and investors on a Jan. 25 earnings conference call.

“We can now decide whether it’s best to operate as a stand-alone or to participate in further consolidation over time, and that’s what we intend to do,” Parker said on the call. US Airways is “always interested in studying potential value-enhancing opportunities.”

With the industry shrinking in tie-ups in the past four years, further contraction is possible while not imperative, Parker said.

US Airways is preparing a merger plan that would boost revenue and fix a weak domestic route system at American, people familiar with the matter said this month. President Scott Kirby is leading the analysis, said the people.

“We expect AMR will remain in bankruptcy for quite some time and, therefore, we and our advisers will be studying the situation for quite some time,” Parker said on the call.

United Continental Holdings Inc. is now the biggest U.S. carrier after its predecessor, UAL Corp., merged with Continental Airlines Inc. in 2010. No. 2 Delta bought Northwest Airlines Corp. in 2008, and No. 4 Southwest acquired AirTran Holdings Inc. last year.

Delta’s evaluation of a US Airways bid was reported by the Wall Street Journal on Jan. 27.

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