A320 EOW
Jun 24, 02, 1:40 pm
http://www.usatoday.com/travel/news/2002/2002-06-24-united.htm
United, US Airways court controversy
By Marilyn Adams and Barbara De Lollis, USA TODAY
United and US Airways are exploring a far-reaching partnership that executives say would bring many of the same benefits as last year's failed merger plan.
Skeptics worry such an alliance ? the biggest between two major U.S. airlines ? might weaken competition just as their merger would have.
United CEO Jack Creighton last week confirmed the two ailing carriers are discussing selling seats for connecting flights on each other's airline. Creighton said that an alliance would bring many of the benefits they sought in United's $4.3 billion offer for US Airways ? without the cost and trouble.
That bid died last year after the Justice Department said it would sue to block the deal because it would violate antitrust laws by reducing competition, especially at East Coast airports where the two overlapped.
"Both carriers are in tremendous financial difficulty, but this would raise a number of competitive questions that deserve to be looked at," says Steve Martin, an airline-competition expert at the General Accounting Office. GAO, Congress' investigative arm, had said the proposed merger would hurt competition and spur more airline consolidation.
"The question is: If a merger wasn't allowed, should something less than a merger be allowed now?" says former Federal Trade Commission general counsel Steve Calkins, a professor at Wayne State University in Michigan.
Unlike a merger, which gets rigorous antitrust scrutiny, a "code-share" alliance faces fewer hurdles. By law, the Department of Transportation is the lead agency reviewing such deals. Such arrangements are legal as long as the airlines remain independently owned. DOT has never blocked a domestic code-share deal. Justice can review domestic alliances for antitrust problems, but it doesn't have to.
A United-US Airways deal could dwarf the largest such alliance, between Continental and Northwest airlines. That brought Continental $140 million in revenue last year. People familiar with the United-US Airways talks say United could gain $300 million to $400 million a year in revenue, and US Airways could realize as much as $300 million a year.
The talks come as both carriers are hemorrhaging money. United, which lost two jets in the Sept. 11 attacks, reported a $2.1 billion net loss last year. US Airways, whose flights at Reagan Washington National Airport are still down from Sept. 11, applied for federal loan guarantees. United is expected to apply this week.
Pilots unions at both United and US Airways have blessed the talks. "It seems to make good sense," says Capt. Steve Derebey, a spokesman for the United pilots union.
United, US Airways court controversy
By Marilyn Adams and Barbara De Lollis, USA TODAY
United and US Airways are exploring a far-reaching partnership that executives say would bring many of the same benefits as last year's failed merger plan.
Skeptics worry such an alliance ? the biggest between two major U.S. airlines ? might weaken competition just as their merger would have.
United CEO Jack Creighton last week confirmed the two ailing carriers are discussing selling seats for connecting flights on each other's airline. Creighton said that an alliance would bring many of the benefits they sought in United's $4.3 billion offer for US Airways ? without the cost and trouble.
That bid died last year after the Justice Department said it would sue to block the deal because it would violate antitrust laws by reducing competition, especially at East Coast airports where the two overlapped.
"Both carriers are in tremendous financial difficulty, but this would raise a number of competitive questions that deserve to be looked at," says Steve Martin, an airline-competition expert at the General Accounting Office. GAO, Congress' investigative arm, had said the proposed merger would hurt competition and spur more airline consolidation.
"The question is: If a merger wasn't allowed, should something less than a merger be allowed now?" says former Federal Trade Commission general counsel Steve Calkins, a professor at Wayne State University in Michigan.
Unlike a merger, which gets rigorous antitrust scrutiny, a "code-share" alliance faces fewer hurdles. By law, the Department of Transportation is the lead agency reviewing such deals. Such arrangements are legal as long as the airlines remain independently owned. DOT has never blocked a domestic code-share deal. Justice can review domestic alliances for antitrust problems, but it doesn't have to.
A United-US Airways deal could dwarf the largest such alliance, between Continental and Northwest airlines. That brought Continental $140 million in revenue last year. People familiar with the United-US Airways talks say United could gain $300 million to $400 million a year in revenue, and US Airways could realize as much as $300 million a year.
The talks come as both carriers are hemorrhaging money. United, which lost two jets in the Sept. 11 attacks, reported a $2.1 billion net loss last year. US Airways, whose flights at Reagan Washington National Airport are still down from Sept. 11, applied for federal loan guarantees. United is expected to apply this week.
Pilots unions at both United and US Airways have blessed the talks. "It seems to make good sense," says Capt. Steve Derebey, a spokesman for the United pilots union.