A US Airways jet taxis past a Delta Air Lines jet at Logan Airport in Boston, Massachusetts November 15. Delta has rejected the US$8 billion hostile bid by US Airways.

ATLANTA, Georgia (AP):

Delta Air Lines Inc., filed a reorganisation plan Tuesday that calls for it to emerge from Chapter 11 bankruptcy protection next spring as a stand-alone company.

It also said that its board has formally rejected US Airways' US$8.4 billion hostile takeover bid and create the nation's largest airline.

The Atlanta-based carrier outlined a five-year business plan, and said that its advisers have determined that a reorganised Delta will have a consolidated equity value of roughly $9.4 billion to $12 billion. It said the plan would result in a recovery by Delta's unsecured creditors of roughly 63 per cent to 80 per cent of their allowed claims.

Existing stock

Delta's existing stock would be wiped out under the plan and creditors generally will receive distributions of new Delta common stock to settle their claims.

Creditors must now vote on whether to approve Delta's reorganisation plan or any competing plan that may be filed with the court. The plan also must be approved by the court.

"The board concluded that Delta's stand-alone plan will provide the company's creditors with superior value and greater certainty on a much faster timetable than the US Airways proposal," Delta said in a statement.

In a conference call with analysts, Delta's chief executive officer, Gerald Grinstein, put it bluntly: "US Airways is the worst of all potential merger partners."

There was no immediate comment by Tempe, Arizona-based US Airways Group Inc, but an official with knowledge of that company's plans who spoke on condition of anonymity because of the sensitivity of the talks said Monday that US Airways was willing to increase its offer if Delta could justify it is worth more.

But Delta said Tuesday that as far as it is concerned it believes flying solo is the best proposal for everyone involved.

"Their proposal is a bad deal for Delta and its creditors," Grinstein said of US Airways.

US Airways' offer included US$4 billion in cash and 78.5 million shares of US Airways stock.

Delta said it believes the US Airways deal is not likely to gain regulatory approval. It also cited as obstacles: overwhelming labour issues and "flawed economic assumptions."

Unsecured creditors

Ultimately, it will be the unsecured creditors committee in the bankruptcy case that will play the decisive role. The committee has not said whether it will support Delta's plan, US Airways' plan or any other offer to buy Delta that may come in.

Delta's chief financial officer, Ed Bastian, said in a conference call with reporters Tuesday that Delta so far has not received buyout bids from any airline other than US Airways, nor had it approached about any other merger proposals.

Delta said its business plan projects, among other things, a 50 per cent reduction in net long-term debt, a return to profitability in 2007 and an increase in net income, after profit-sharing, from roughly US$500 million next year to about US$1.2 billion in 2010.

Delta filed for Chapter 11 in New York in September 2005.

It's reorganisation plan calls for rolling its bankruptcy financing of US$2.1 billion into a new package that would go into effect when it emerges from Chapter 11.

There has been no decision about who will lead Delta once it emerges from bankruptcy, Bastian said.

Delta's current chief, Grinstein, has said he plans to leave around the time it exits bankruptcy.