• The Wall Street Journal (subscription required), Wednesday, November 15, 2006 11:30 AM

US Airways Group is proposing a merger with Delta Air Lines that would operate under Delta's name after its emergence from bankruptcy. Delta, the third-largest U.S. carrier by traffic, filed for bankruptcy protection last September. US Airways is the nation's sixth-largest carrier.

The deal--which is valued at about $8 billion in cash and stock--would lead to a 10% cut in the combined airlines' capacity, reduce unprofitable flying, and improve the mix of traffic, US Airways says. The company believes the combination would generate at least $1.65 billion in annual synergies.

US Airways Chairman and CEO Doug Parker telephoned Delta CEO Gerald Grinstein this past summer to gauge his interest in a possible merger, according to those familiar with the situation. Grinstein reportedly told Parker that Delta wasn't interested in starting merger talks, because the Atlanta-based airline plans to exit bankruptcy-court protection next spring as a stand-alone carrier.

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