U.S. Airways Looks to Buy Delta for $8 Billion

JEFFREY BROWN:

U.S. Airways is the nation's sixth-largest airline. It came out of bankruptcy only last year and merged with America West. Delta is the nation's third-largest airline and still in the midst of bankruptcy.

Today, the smaller U.S. Airways made an $8 billion bid for the larger Delta. And if it's successful, the new combined airline will be one of the largest carriers in the world, providing the most flights on the East Coast and in transatlantic travel.

Here to tell us what's going on is Richard Gritta, professor of finance and transport in the Pamplin School of Business at the University of Portland.

Professor Gritta, let's start with, why is U.S. Air making this bid? What does it want?

RICHARD GRITTA, University of Portland: Well, it wants to survive, just like everybody else. And to survive, the key thing now is to abandon the short-haul markets, where the lower cost carriers are basically bleeding the major or legacy carries dry. And so this makes sense. This makes sense to merge with a carrier that has a lot of international routes and go where you can make money.

JEFFREY BROWN:

Now, remember, not that long ago there seemed to be obituaries in the works for U.S. Airways. How is it able now, so soon after coming out bankruptcy, to make an $8 billion bid?

RICHARD GRITTA:

Well, they've got the backing of Citicorp, and that's a big thing. They've got financial backing. And if you've got money, you can always do a deal. But I think they feel to survive the long run, they've got to do something, and the something is merge. And Delta makes sense for them.