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Delta Creditors Spurn US Airways' Offer

Delta's official creditors committee threw its support behind the bankrupt airline's standalone reorganization plan on Wednesday, a decision that prompted US Airways to drop its hostile $9.8 billion bid to buy Delta.

Delta Air Lines Inc.'s committee said in a statement it reached its decision after a lengthy review of both Delta's proposal and US Airways Group Inc.'s proposal.

The creditors committee is a key player in Delta's Chapter 11 case. US Airways had asked for support from the committee and set a deadline of Thursday.

"We are disappointed that the Committee, which has been chosen to act on behalf of all Delta creditors, is ignoring its fiduciary obligation to those creditors," US Airways Group Inc. Chief Doug Parker said in a statement. "Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta stand-alone plan."

Delta has said it projects it will be worth $9.4 billion to $12 billion when it emerges from bankruptcy by the middle of this year. Its management had said repeatedly it wanted to remain on its own and not combine with US Airways.

The official creditors committee said in its statement that it "has determined that it will support the standalone plan of reorganization as finally agreed upon between Delta and the Creditors Committee that will be filed later this week."

"The Creditors Committee reached this determination after engaging in extensive discussions with representatives of Delta and US Airways over the last two months and upon consideration of the advice of the Creditors Committees legal, financial and industry advisors," the statement said.

The statement added, "In reaching this decision, the Creditors Committee considered a variety of factors, including, but not limited to, valuation of, the timing and the risks associated with, and the likelihood of a successful consummation of the US Airways proposal and the plan."

The committee said it will work with Delta to confirm Delta's plan.

US Airways first bid for Atlanta-based Delta in November, setting off speculation of further consolidation in the airline industry.

But Parker said Tuesday that that's unlikely.

He said it's tough to make an airline merger work unless one of the carriers is going through bankruptcy, which would allow the combined company to get out of expensive leases and contracts.

Parker said if Delta wasn't interested, the only other airline that would be good to combine with was Northwest Airlines, which also is going through bankruptcy.

"If both Delta and Northwest emerge from bankruptcy standalone, I don't think you'll see consolidation of the airline industry in this cycle," Parker said.

"Not until you find airlines in financial distress will you see consolidation happen."

US Airways has hubs in Phoenix, Philadelphia and Charlotte, N.C. Delta's hubs are in Atlanta, Cincinnati and Salt Lake City. Regional carriers affiliated with both carriers represent the bulk of commercial air traffic at West Virginia's airports.

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