US Air Goes After Delta

Stocks throughout the sector surged on the news, and the Amex Airlines index was up 5.2%. Shares of US Airways rose 16.8% to $59.46. UAL(UAUA Quote), the parent of United Airlines, climbed 9% to $39.99.

During a conference call with analysts at the Citigroup Transportation Conference, United Airlines CFO Jake Brace said his company wasn't surprised by the US Airways bid. "The industrial logic of mergers in the airline industry is compelling," he said. "There is probably no need for more than two, three or maybe four network carriers, the most likely number being three.

"We believe that consolidation makes sense for the industry, [and] if it makes sense for us to participate in it, we will," Brace added. "We've been very open in talking about that."

TheStreet.com reported July 27 that Parker felt he had an obligation to consider a merger with Delta or another bankrupt carrier, Northwest Airlines (NWACQ Quote), because "tremendous value can be created through consolidation."

US Airways said about $935 million in network savings and benefits would be created by combining its network with Delta's, a process that would involve a 10% reduction in combined capacity. At least a portion of that would result from a reduction in the use of 50-seat aircraft, President Scott Kirby said.

Because capacity cuts have fueled the airline industry's current cycle of profitability, the reduction is likely to have broad appeal within the industry. Another $710 million in synergies would result from combining airport facilities and eliminating redundant systems and overhead.