US Airways Group Inc. said Wednesday it has made an $8-billion US cash and stock offer for Delta Air Lines Inc. in a deal that would create one of the world's largest airlines.

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

Under the deal, the airline would operate under the Delta name and serve more than 350 destinations across five continents.
(George Widman/AP)

US Airways said the offer is a 25 per cent premium over the current trading price of Delta's pre-petition unsecured claims as of Tuesday, and a 40 per cent premium over the average trading price for Delta unsecured claims over the last 30 days.

If the deal is completed, the airline would operate under the Delta name and serve more than 350 destinations across five continents.

Delta spokeswoman Thonnia Lee seemed surprised by the announcement Wednesday morning and said she could not yet comment in detail. But she said Delta has consistently said that it plans "to emerge from bankruptcy as an independent airline."

According to letters filed with the U.S. Securities and Exchange Commission, US Airways CEO Douglas Parker originally had a conversation with Delta CEO Gerald Grinstein about a combination of the two airlines in the spring and followed up with a letter to Grinstein on Sept. 29.

In a letter to Parker dated Oct. 17, Grinstein said he and Delta's board "believe it would not be productive to engage in the type of exploratory discussions that you proposed at the time."

US Airways Group, which was created after US Air emerged from bankruptcy and was acquired by America West last year, said the deal is expected to generate $1.65 billion in annual savings, from optimization of the airlines' complementary networks and combining facilities in overlap airports.

The deal would lead to a 10 per cent cut in the combined airlines' capacity, and also reduce unprofitable flying and improve the mix of traffic, US Airlines said. The company's statement did not specify which airports would be affected or whether there would be job cuts.