NEW YORK (Reuters):

US Airways Group Inc raised its takeover offer for larger, bankrupt rival Delta Air Lines Inc by about 20 per cent to US$10.3 billion on Wednesday, sweetening a deal for creditors and putting pressure on Delta management.

Delta last month rejected the original bid, valued at US$8.5 billion at Tuesday's market close, saying the company was worth at least US$9.4 billion, and possibly as much as US$12 billion, as an independent carrier.

After making its original bid on November 15, US Airways' efforts to acquire Delta had stalled with creditors undecided. The latest bid sets a February 1 deadline for creditors to react.

The official creditor committee, which is key to deciding what plan succeeds, wasn't immediately available to comment.

The nine-member committee includes Boeing Company, Coca-Cola Company, the Air Line Pilots Association, and the Pension Benefit Guaranty Corp.

A less powerful creditor group that represents some bondholders and other unsecured creditors - which has been more receptive to US Airways' original proposal - suggested it might back the new offer.

"We welcome US Airways' move and intend to carefully analyse this over the next several days," said a person close to the ad hoc creditor group, which could yet play a crucial role in deciding Delta's fate.

Delta's management said it would review the new offer, but that the proposal didn't address its past concerns relating to anti-trust and labour issues and the combined company's debt burden.

"On its face, the revised proposal does not address the significant concerns that have been raised," the company said in a statement. It noted that the new offer would saddle the combined company with an additional US$1 billion in debt.

'IRRESISTIBLE OFFER'

Analysts and industry watchers expect other mergers in the industry to hinge on the success of US Airways' bid for Delta. The increased offer boosts its prospects.

"This would seem to be an irresistible offer," airline consultant Robert Mann said. "I think Delta's stuck. I think they've kind of cornered themselves."

A raised bid was expected after US Airways on Monday bolstered the financial muscle behind its effort by adding Morgan Stanley as a backer alongside Citigroup. The two banks have committed US$8.2 billion in financing for the offer.

The new bid offers Delta's creditors US$5 billion in cash and US$89.5 million US Airways shares. The original offer, which was rejected by Delta last month, was for US$4 billion cash and US$78.5 million Airways shares.

"What we did clearly get was a view the creditors were struggling with the decision and struggling with comparing the two offers," US Airways Chief Executive Doug Parker told Reuters in an interview. "We wanted to eliminate any doubts that the merger with US Airways is better for Delta's unsecured creditors than Delta's stand-alone plan."