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U.S. Airways makes $8 billion offer for Delta

ATLANTA - U.S. Airways is still painting new logos on many of the planes it got when it combined with America West last year.

It may need more paint.

On Wednesday, the company said it was offering $8 billion in a hostile bid to take over rival Delta Air Lines and create what could be the nation's largest carrier.

The move, despite Delta's repeated statements it isn't interested in a merger, could start a stampede of competing bids in a long-predicted industry consolidation.

The offer, however, faces many obstacles, and analysts questioned whether the deal can be completed on U.S. Airways' compacted timeline. Delta, which said it would review the proposal but was pushing ahead with its goal to emerge from bankruptcy as a standalone company, has yet to file its own plan of reorganization, and it has the exclusive right to do so by

Feb. 15.

''My main question mark is if the politicians and regulators would allow it to happen, because if it did it would probably set off a trend for industry consolidation,'' Ray Neidl, an airline analyst with Calyon Securities in New York, said of a Delta-U.S. Airways combination.

The offer comes as U.S. Airways and America West are still integrating their operations after their combination. To date, only 57 percent of America West planes have been painted over with U.S. Airways' logos, a spokesman said.

The deal also could cause some headaches for labor groups, said aviation consultant Robert W. Mann.

''There will be a huge seniority integration problem that will result. It's already problematic after the U.S. Airways-America West merger. This will only increase it fourfold,'' Mann said.

The offer to buy Delta once the Atlanta-based airline emerges from bankruptcy protection by the middle of 2007 would give Delta's unsecured creditors $4 billion in cash and 78.5 million shares of U.S. Airways stock.

As it stands now, Delta's common shares are likely to end up worthless when it exits bankruptcy. In most bankruptcy cases, debtholders end up with new shares of the company.

If the deal is completed, the combined airline would operate under the Delta name and serve more than 350 destinations across five continents. U.S. Airways has not decided where the combined company would be based. It would divest certain assets, including a shuttle that operates in the Northeast. U.S. Airways also said it would optimize flights at its hubs, but did not say what further impacts the hubs could face.

Shares of U.S. Airways Group Inc. rose $6.67, or 13.1 percent, to $57.60 in afternoon trading on the New York Stock Exchange. Delta Air Lines Inc. shares are traded over the counter.

Doug Parker, chief executive of Tempe, Ariz.-based U.S. Airways, said in an interview he is aware of the comments made by Delta's management in recent months, but he believes this is a fair offer and that ultimately Delta's creditors will see that.

''The (bankruptcy) process is designed so that the creditors get the highest possible value for their clients,'' Parker said. ''Given that process, what we have done is gone public with an alternative to a standalone plan.''