US AIRWAYS IS in advanced merger talks with America West to create a low-cost carrier that would rival Southwest in size. If completed, a merger could prove the first step in airline-industry consolidation.

US Airways Talks
To America West
About a Merger

Combination Would Rival
Southwest in Size and Reach;
A New Consolidation Wave?
By SUSAN CAREY and MELANIE TROTTMAN
Staff Reporters of THE WALL STREET JOURNAL
April 20, 2005

US Airways and America West Airlines are in advanced merger talks to create a national low-cost airline rivaling discount king Southwest Airlines in size, say people familiar with the matter.

A deal hasn't been completed, and some obstacles remain, these people caution. With US Airways Group Inc. in Chapter 11 bankruptcy protection, there are extra complications. A deal would need approval from a host of parties, including the bankruptcy judge; US Airways creditors, including its largest, General Electric Co.; America West shareholders; unions; and the federal government.

But if a deal comes together, it could prove the first big step in a long-awaited consolidation of the embattled airline industry, in which companies are struggling with high oil prices, too many seats, pension costs and brutal ticket-price wars. Though most big airlines currently lack the cash to do deals and share prices are depressed, some industry analysts believe hedge funds and private equity firms eventually will jump in to force restructuring, especially if more big carriers file for Chapter 11.

Together, US Airways, the nation's seventh-largest carrier, and America West, which is No 8, would form an airline that would overtake Southwest as the sixth-largest, based on 2004 traffic statistics. With America West's hubs in Phoenix and Las Vegas and US Airways' in Philadelphia and Charlotte, N.C., the bulked-up discounter would have the distinction of offering low fares on an integrated hub-and-spoke network that would offer many more choices of routings.

That would contrast with other hub-and-spoke airlines, which have much higher costs -- both US Airways and America West have slashed expenses in recent years -- and could prod some airlines toward embracing a low-cost model. It also would contrast with the far more profitable Southwest, which is a point-to-point budget airline that serves heavily traveled routes.

US Airways, already cutting back on some routes, has been under assault by Southwest in Philadelphia and Pittsburgh and other discounters in Charlotte, Washington and Boston. A merger would allow it to expand its stunted route network and grow to the West, where it offers very few flights. For its part, America West is hemmed in by Southwest at its hubs in Phoenix and Las Vegas, and needs places outside its Western U.S. territory to grow and use new airplanes it has on order.

The US Airways-America West talks are known as "Project Barbell" because US Airways is big on the East Coast and America West on the West Coast, with a modest number of transcontinental flights between them, said people close to the matter.

One person familiar with the matter said US Airways has talked to several other airlines over the past two years about a potential merger. But the discussions with America West Holdings Corp., the airline's parent company, have gained momentum recently. In recent days, it had been expected that the two airlines could announce an agreement in principle to merge as soon as next week, but that timetable is in question.

If an agreement is reached, the initial plan would be to fly under the "US Airways" brand immediately but to keep the operations separate for a time, linking the network through code-sharing, while integration of fleet and personnel is phased in.

Talks could still break down, and there are some wild cards. If a deal is struck, America West and potential new equity backers would play a role in shaping the reorganization plan that would allow US Airways to emerge from bankruptcy this year, said one knowledgeable person. Another possibility is that the bankruptcy judge overseeing US Airways could require a bidding process to determine if better offers could be had, said another knowledgeable person.

In addition, the two airlines' unions would have to agree to rules for merging their members. The federal government, which has extended loan guarantees to both airlines, would have to agree to restructure that debt and specifically have to approve a merger by America West because of the conditions of its loan. The Air Transportation Stabilization Board, a federal panel created after the 2001 terrorist attacks to help the industry, has a secured loan to US Airways with a balance of $700 million, and an unsecured loan with America West with a current balance of $300 million.

Even if a deal doesn't happen, US Airways, Arlington, Va., is positioned to emerge from bankruptcy as a stand-alone company later this year. The company filed for bankruptcy last year for the second time in as many years. It has managed to avoid liquidation, a fate it widely was expected to meet, and used the time in court protection to further lower its costs and revamp its operations to become more like a discount airline. Its models in the transformation have been America West and JetBlue Airways.

Last year, US Airways posted a net loss of $611 million on revenue of $7.1 billion. But the carrier recently has confounded doomsayers by lining up $250 million in financing from two regional airlines, one an affiliate of closely held Air Wisconsin Airlines Corp., the other Republic Airways Holdings Inc.

A few months ago, according to one person familiar with the matter, US Airways' big creditors began to worry that the carrier would be on shaky financial ground when it emerged, and encouraged the company to seek a partner. Certain of US Airways' key creditors -- including GE's airline financing and leasing arm -- are actively involved in the merger talks, according to people familiar with the matter. A GE spokesman declined to comment.

The merger scenario currently being discussed would require US Airways to find between $350 million and $500 million in total new funding, and possibly to arrange an additional $250 million in loans. US Airways is approaching a number of sources, including private equity firms, other regional airlines and its existing creditors. If it succeeds, a holding company created by the merger would give stock in the new company to America West shareholders, US Airways creditors and new equity investors, said one person familiar with the deal.

A merger could allow the two airlines to eliminate redundant equipment, gates and possibly personnel at their airport locations. They could rationalize some of their transcontinental flights. And because US Airways in bankruptcy can reject airplane leases, it effectively could "right-size" the combined airline's fleet by getting rid of more planes because it knows it will be able to take new planes on order to America West. But it isn't thought that the two would shrink by the same degree that an outright liquidation would take capacity out of the industry.

US Airways, which has been flying since the 1940s, would carry more built-in costs into a combination, in part because its work force is more senior than that of America West, which began flying in 1983. But its unions have made big sacrifices in the carrier's two visits to bankruptcy court, and all have lost their defined-benefit pension plans.

Being a big airplane lessor at both companies, GE probably would reduce its exposure by taking more planes back from US Airway under this scenario than it would if US Airways pursued a stand-alone strategy.

America West, based in Tempe, Ariz., dodged a bankruptcy court filing in late 2001 by winning a $429 million commercial loan backed by $380 million in federal guarantees. That unlocked more than $600 million in other financing and concessions from manufacturers, vendors, leasing firms and others. But the carrier could still be at risk.

It posted a net loss last year of $89.9 million on revenue of $2.34 billion, and some analysts believe that with fuel at current high prices, America West will face a liquidity squeeze later this year. It ended 2004 with $419 million of cash and in March made a $42.9 million semiannual payment on its own ATSB loan. The carrier owes another similar payment in September.

America West, which long has had low costs among traditional airlines, began to transition into a low-fare carrier in early 2002, when it slashed its highest business fares. The move boosted its market share and revenue, restoring profitability. But worsening industry conditions began taking a toll even on discounters. Recently, the company has begun marketing itself as a discount airline with amenities such as first class, assigned seats, airport clubs, in-flight entertainment and code-share relationships that allow its frequent fliers to redeem points on other airlines flying overseas.

These are some of the same amenities US Airways has retained even as it has slashed its expenses, cut its unionized workers' wages and benefits, and shrunk its operations. Southwest and JetBlue don't offer first class.

Doug Parker, America West's chief executive, has been extremely vocal about the need for industry consolidation and his interest in participating. Late last year, America West studied an offer to buy all of ATA Airlines, a discounter that had filed for bankruptcy-court protection, but in the end backed away because ATA's airplane leases were too costly. Southwest ultimately did a smaller deal with ATA, buying some of its gates at Chicago's Midway Airport and entering into a code-sharing relationship.

OK, folks. Guess we need to do our homework on AWA. Here's a link to their fact sheet... http://www.americawest.com/aboutawa/companyprofile/aa_factsheet.htm

They are a much smaller airline than US... AWA has 578 mainline, 924 including Express daily departures while US has 1239 mainline, 94 shuttle and 3474 total daily departures including Express ops.

Aircraft numbers: 139 America West mainline 54 America West Express
US has 279 mainline and 288 Express planes.

Destinations: AWA 95, US 179 (both numbers include Express only airports).

US is definitely the bigger entity.

I guess we'll also need to learn our way around their hubs in LAS and PHX.

I do like some aspects of the FF program. Short distance awards, low mileage for up's... I wonder if US will integrate some of these aspects into DM?

I think you meant to post this page........


http://www.americawest.com/flightfund/aboutprogram/ff_ffeliteprogram.htm

I do like some aspects of the FF program. Short distance awards, low mileage for up's... I wonder if US will integrate some of these aspects into DM?


I think you have the last part backwards. US will have very little to say in this deal

The report states the entity would fly under the US Airways brand. US is lead by a financial person and not an airline person. This would give US depth as the airline people from AWA probably would actually run the airline and improve F service. They have already been through simplifying fares, so they have experience in that area. And most important, their website works> :)

If we take a giant leap and assume this deal happens, it turns out to be quite a complicated one:

If it's a merger, how does seniority work? It would seem that if the unions do their usual thing, it's the HP crews that are likely to get the shorter stick even if HP does an acquisition.

The fleets are a tough call. It's easy to say that US can dump the 737-300/400 series, but there isn't a lot over overlapping capacity in the two systems except on the US hubs - LAS/PHX routes. If finances allow it could be an opportunity to get some new orders in.

Speaking of finances, it isn't pretty for either one now. HP seems to be expecting a liquidity crunch late this year. US sure isn't printing money. I don't see what this does about this, unless this is packaged as a mass combination of assets under bankruptcy (Ch 7 presumably, brought together by a third party). Even if it is, there's a giant hole in north/south coverage in the Midwest, unless the entity combines with UA or otherwise maintains the link to Star.

If the remnants of US were to leave Star, those of us who travel abroad or to UA-dominated areas a lot and have gotten a nice benefit from US's membership in it would have a harder time sticking with the new entity.

We obviously don't know the details, but what's come out so far doesn't quite make me jump for joy yet.

I think you have the last part backwards. US will have very little to say in this deal

I am not sure you are right, I think US will have some say in this deal. I know US being in bankruptcy II you would think HP would be buying US but from what I have heard and read this is a merger not HP buying US.

Anyway I think this is good for both airlines if they do this right, big east and west coast networks and some trancon (CLT, PHL, PIT, IAD, JFK BOS.)

Here are some more articles: MarketWatch (http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7BF97103F9%2D2C1D%2D4B09%2DABF5%2DCF955F6089 05%7D)

The Street (http://www.thestreet.com/_yahoo/stocks/transportation/10218507.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA)

What do you think the chances are that this could cost US *A membership?

I am not sure you are right, I think US will have some say in this deal.

Well let's hope not since Mark Kuhns (the e-commmerce wiz kid of US) is the Director of Marketing and the DM program.

We will all be better off if the wiz kids of the palace get shown the door.

I think you meant to post this page........


http://www.americawest.com/flightfund/aboutprogram/ff_ffeliteprogram.htm

Yeah, yeah...forgot that one, bro. ;)

Well let's hope not since Mark Kuhns (the e-commmerce wiz kid of US) is the Director of Marketing and the DM program.

We will all be better off if the wiz kids of the palace get shown the door.

I agree that some US people need to be shown the door. I think Doug Parker, from HP, will be running the show. I just think US will have some say in the meger.

If we take a giant leap and assume this deal happens, it turns out to be quite a complicated one:

If it's a merger, how does seniority work? It would seem that if the unions do their usual thing, it's the HP crews that are likely to get the shorter stick even if HP does an acquisition.

The fleets are a tough call. It's easy to say that US can dump the 737-300/400 series, but there isn't a lot over overlapping capacity in the two systems except on the US hubs - LAS/PHX routes. If finances allow it could be an opportunity to get some new orders in.

Speaking of finances, it isn't pretty for either one now. HP seems to be expecting a liquidity crunch late this year. US sure isn't printing money. I don't see what this does about this, unless this is packaged as a mass combination of assets under bankruptcy (Ch 7 presumably, brought together by a third party). Even if it is, there's a giant hole in north/south coverage in the Midwest, unless the entity combines with UA or otherwise maintains the link to Star.

If the remnants of US were to leave Star, those of us who travel abroad or to UA-dominated areas a lot and have gotten a nice benefit from US's membership in it would have a harder time sticking with the new entity.

We obviously don't know the details, but what's come out so far doesn't quite make me jump for joy yet.


Most likely, they will keep the international routes as they are highly profitable. Therefore, many of US Airways' international flight attendants will keep their seniority as it will take a while for America West flight attendants to get certified to fly on the B767 and A330.

What do you think the chances are that this could cost US *A membership?


United will be very upset, but maybe the other *A carriers will see the new size of the airline as an asset with more flights to codeshare with *A partners.

I agree that some US people need to be shown the door. I think Doug Parker, from HP, will be running the show. I just think US will have some say in the meger.
Bronner is being much to quiet. He has an ace up his sleeve somewhere. I agree US will have some say. The article can be read both ways. In my first read, I was thinking US gets some say until they figure out how to put them together, then HP drives the bus. On second read, I read it as you did.

Time will tell.

What do you think the chances are that this could cost US *A membership?

Well, UA is not guaranteed to ever leave Chapter 11. The powers-at-be @ Star might not want to put all of their eggs in the UAL basket.

Hard to tell though. Cactus does have an alliance with BA -- anyone ever think they might see the day where US and BA were partners again?

I think the key is for the combined airline to not shrink so much that they again become a smaller player. A combined airline would need to grow in the face of the LCCs, not hide.

*A has always relied on UA for USA coverage and looked at US to fill in the gap in the east. If this merger goes through, then a sigh of relief could be heard through *A since America is covered with or without UA. UA isn't close to coming up with a plan and then could fail without hurting *A too much.

Few notes:

It won't be a merger. In fact, you can expect US to shed even more assets and labor contracts in bankruptcy. HP's labor force will not be displaced by US' labor force. I'd even look for the prepacked chapter 7 auction.

HP will be the acquiring entitiy, and in the driver's seat. Even if a third party does the deal, the current bunch of losers at CCY could not carry Doug Parker's hat in terms of management acumen.

"Operation Barbell" is completely apropos, and illustrates why this is a bad idea. Remember when a big airline from the east coast acquired a LCC on the left coast? You will note that 15 years later, nothing is left of PSA and US has no presence on the west coast. I'm still waiting to hear why the concept is any better 15 years later. If nothing else, now you have the discounters on the east coast as well.

This business of Star not needing UA is funny. Take a look at how many flights feed into JFK, IAD, ORD, LAX, SFO from overseas Star carriers. Compare and contrast that with the number feeding PHX, LAS, PHL, and CLT. They do this deal, and it'll be a quick exit from Star for the combined entity.

ATA would have made sense for America West, largely because of MDW--which is exactly why LUV beat them to the punch. US has no franchise worth risking the business (HP's current state) over.

Most likely, they will keep the international routes as they are highly profitable. Therefore, many of US Airways' international flight attendants will keep their seniority as it will take a while for America West flight attendants to get certified to fly on the B767 and A330.

There is no longer a separate internation division with the f/a's in either CLT, PIT or PHL. F/A's in those bases will be flying domestic and international, depending on their preferences and seniority. Training on the 767 and A330 are only a 1 day training program. Training for the international service, forms, etc. is 3 additional days.

HP is a very much a regional airline and their programs reflect that, lower qualifications for elite, regional branding "AmericaWest"

So my predictions are as follows

1.) The new US, stays a member of the star alliance

2.) The new US, continues code-sharing with UA primarily on ORD traffic and many of transatlantic and transpacific routes. (Covering the thin part of the barbell)

3.) US management goes the way of the do-do bird with Parker or other HP managers running the show.

4.) Dividend miles survives with some changes TBD. Remember HP's frequent flier program has no support for international and real long-haul flights.

And most important, their website works> :)

Well, mostly. Their website does a funny thing now and then when trying to directly log in and go to check-in.

BTW, I am watching this thread with interest, having moved last year and now have SLC as my primary airport instead of PIT. I got comped Gold with HP, and liked them for the most part, except for that %#*! midnight flight from LAS to SLC. I am still sitting on 100K US miles. (Curiously enough, I have been flying DL mainly this year since they changed their FF program)

HP is a very much a regional airline and their programs reflect that, lower qualifications for elite, regional branding "AmericaWest"

So my predictions are as follows

1.) The new US, stays a member of the star alliance

2.) The new US, continues code-sharing with UA primarily on ORD traffic and many of transatlantic and transpacific routes. (Covering the thin part of the barbell)

3.) US management goes the way of the do-do bird with Parker or other HP managers running the show.

4.) Dividend miles survives with some changes TBD. Remember HP's frequent flier program has no support for international and real long-haul flights.

I think you are right about your observations. I think with Parker incharge this will be different then the PSA merger. One thing Parker is on the west coast.

I do not think this will be a chapter 7 of US sold to HP but will be a merger with US bringing third party financing. I think Bronner (RSA) will be involved unless they are outbid by someone else.

HP is a very much a regional airline and their programs reflect that, lower qualifications for elite, regional branding "AmericaWest"

So my predictions are as follows

1.) The new US, stays a member of the star alliance

2.) The new US, continues code-sharing with UA primarily on ORD traffic and many of transatlantic and transpacific routes. (Covering the thin part of the barbell)

3.) US management goes the way of the do-do bird with Parker or other HP managers running the show.

4.) Dividend miles survives with some changes TBD. Remember HP's frequent flier program has no support for international and real long-haul flights.

That's what would make sense based on the preliminary information released so far. To be honest, it doesn't look like this is really a "merger", rather US' creditors buying out HP shareholders and combining the airlines. Simply a matter of convenience, as US is still in Chap 11 which affords it some advantages which would not be available were the reverse to happen. Given that the US name will taken by the new entity, I think that leaving Star would be unlikely. Finally, I'm not sure what the problem with senority would be - there is little line-level duplication and I doubt that we'd see much more eliminated in terms of routes. HP staff have less senority, but also generally fly the types of routes that would be awarded to the lower senority members of a combined entity.

Regardless, Bonner's comment that they would do whatever it takes to keep US flying is bound to be good news for this forum.

...I got comped Gold with HP, and liked them for the most part, except for that %#*! midnight flight from LAS to SLC...

I'm still reading up on HP this evening, but isn't their LAS hub more of a late night op geared towards the vacation package crowd? I'm sure there are exceptions to this, but that was always my impression of it.

That said, if true it's a good way to keep up aircraft utilization and if there's anywhere in the US that (some) people don't mind arriving or departing at odd hours, it's LAS vacation crowd.

I'm still reading up on HP this evening, but isn't their LAS hub more of a late night op geared towards the vacation package crowd? I'm sure there are exceptions to this, but that was always my impression of it.

I think this was more true several years ago when they operated one flight to LAS from most cities. However over the last several years LAS has become a "real" hub for HP.

Few notes:

"Operation Barbell" is completely apropos, and illustrates why this is a bad idea. Remember when a big airline from the east coast acquired a LCC on the left coast? You will note that 15 years later, nothing is left of PSA and US has no presence on the west coast. I'm still waiting to hear why the concept is any better 15 years later. If nothing else, now you have the discounters on the east coast as well.


Clue - I've been having similar thoughts, although a big downside with the barbell model will be that almost all of the mid-sized cities on the far coasts will be 3 flights away from a mid-sized city on the east coast.

E.g., what is currently SYR-PIT-SAN will soon be SYR-PIT-PHX-SAN.

Why would someone choose this over SYR-ORD-SAN or SYR-DTW-SAN or SYR-JFK-SAN (on JetBlue)?

Expect PIT to lose most of its remaining nonstops.

I am always up for a LAS connection. ^

It just struck me that I hadn't seen any talk of how this affects the regionals, some of whom have invested in US or have been contemplating it. We have these guys also involved, in addition to the ATSB, RSA, GECAS, etc.:

Republic Airways (Chautauqua) - has the $125 million investment in US and an option through the end of 2005 (I think) to acquire MidAtlantic, the Embraer 170 sub of US.
Air Wisconsin - has the $125 million investment in US, soon to be divorced from UA. How long till they fly for US and what do they do with their Bae-146 fleet?
Mesa - flies Express for both HP and US, haven't pulled the trigger yet on a US financing.

Clearly these guys will have to have something to do with this merger should it occur ...

I think you are right about your observations. I think with Parker incharge this will be different then the PSA merger. One thing Parker is on the west coast.

Unless Parker is sitting in IND, it matters not. The route structure does not fly if you overfly everything between PHX and CLT. Without a mid-continent hub, it's no better than US/PSA was.

I do not think this will be a chapter 7 of US sold to HP but will be a merger with US bringing third party financing. I think Bronner (RSA) will be involved unless they are outbid by someone else.

Now that's rich. Want to know who owns the lion's share of HP, along with all the Class A preferred shares? Bonderman. That's right, Texas Pacific, the guys who tried to bring US out of Chapter 11 in the first place, only to be outbid by our man from Alabubba. HP is a helluva lot closer to being a consistantly profitable operation than US is--Bonderman will want to be paid, and paid well. Bronner probably does not have the stones to dump another half-million into US. Ergo, Bronner won't be buying/merging both.

Look for a capital infusion at most from HP (specifically Texas Pacific). Maybe a codeshare. Bronner gets about a 10th of his original investment out. A merger would kill the combined entity, and Bonderman is smarter than that.

If anyone remembers a while back I did say that if a merger were to possibly happen that the US Airways name would probably survive. But just in name. It sells better and is more attractive. I guess the search is working. Would not be too hard to find.

I doubt that the new US will leave *A. US will need the international destinations that *A provides and the non-US *A carriers will want US as a backup to UA.

Look for a capital infusion at most from HP (specifically Texas Pacific). Maybe a codeshare. Bronner gets about a 10th of his original investment out. A merger would kill the combined entity, and Bonderman is smarter than that.

This is another possibility according to the Washington Post - that HP provide the remaining $100 million in exchange for an equity stake.

Clue - I've been having similar thoughts, although a big downside with the barbell model will be that almost all of the mid-sized cities on the far coasts will be 3 flights away from a mid-sized city on the east coast.

E.g., what is currently SYR-PIT-SAN will soon be SYR-PIT-PHX-SAN.

Why would someone choose this over SYR-ORD-SAN or SYR-DTW-SAN or SYR-JFK-SAN (on JetBlue)?

Expect PIT to lose most of its remaining nonstops.

1.) What's the reasoning for PIT loosing service?

2.) Even if they do....you have SYR-PHL-SAN or SYR-CLT-SAN. US wouldn't eliminate transcon's from the east coast. That would be like saying UA would do OAK-DEN-ORD-SYR rather than OAK-ORD-SYR. Also, you may start seeing US/HP adding stuff like BDL/SYR/ALB/PVD/RDU, etc.-PHX or LAS (1x daily 319 or something) but that would enable connections never before possible such as RDU-PHX-MRY/Reno/Yuma/Flagstaff, etc.

My two cents, if this deal comes to pass...

1. New eyes might see that PIT (and US/HP) could benefit from more service, not less.

2. Now much easier to financially justify a Club at LAX.

Well if the merger were to happen I wonder what would happen at DCA? Would the new US Airways pick up the DCA PHX slot? Or would those slots open back up like when AA and TWA merged. Would the New US Airways get addtional gates at DCA (the ones that HP have now.)

I am just glad that they are keeping the name :) Well it is all just hot air for now. But at least the talks are in the open now.

Now all we need is a focus city some where in middle America. What would be a good mid point?

T

Bronner probably does not have the stones to dump another half-million into US.

Hey, Clue, guess you mean another half a billion. Heck, I could invest the number you refer to. (But I wouldn't!).

I am not sure you are right, I think US will have some say in this deal. I know US being in bankruptcy II you would think HP would be buying US but from what I have heard and read this is a merger not HP buying US.

What's presented (or even sold) as a merger is often an acquisition; and vice versa.

Now all we need is a focus city some where in middle America. What would be a good mid point?

T

Back in the early 90's, all US transcons use to stop somewhere in the middle of the country, Indianapolis I think. It was the wildest experience as all these flights merged there seemingly at once so people could make changes and continue to the east or west coast. I did it twice--and hated the mid-flight change. When I lived in DCA, I preferred to take Express to BWI and then fly straight across.

I am always up for a LAS connection. ^

Especially if they allow for a stopover. ^ ^ ^ ^

I see the obvious appeal of LAS for those in the east, but it is a busy, noisy (anybody else tired of the Wheel of Fortune slot machines?) terminal that is smokier than most. I like the PHX terminal a lot more.

That being said, I like the prospect of combining the miles I currently have in both programs. :)

I see the obvious appeal of LAS for those in the east, but it is a busy, noisy (anybody else tired of the Wheel of Fortune slot machines?) terminal that is smokier than most. I like the PHX terminal a lot more.

LAS is smoke free except for the small smoking areas. US moved to the new D gates about a year ago and it is beautiful, very open with lots of windows. HP is still in the old buildings I think A & B. Because of the size of the operation I assume US will move over to A or B again to use HP gates.

Latest WSJ article (http://money.cnn.com/2005/04/20/news/fortune500/usair_amwest.dj/index.htm?cnn=yes)

A little more background info in this one.

The barbell problem is interesting but, IMHO, the failure of the PSA acquisition was a lot more complex than that. One would hope that someone has been thinking about that problem. (We can be excused for thinking that people at HP are smarter than those running the Crystal Palace...)

Here's a thought for you -- TPG is a bright bunch of guys. They still own a good chunk of HP (55%?) and have done reasonably well with it. They had some interest in US before Bonner popped up. Now they're back. Maybe they've updated their plan...

A friend of mine has both a US Air and Amer West credit card and uses them both. He started with the BofA debit card back when you could do money orders at the USPS for miles. He has since earned many miles on both airlines and uses them regularly despite all worries of Ch11, etc.

I dumped all my US Air miles and never earned any on America West and I thought both airlines would fold. I actually have no miles on either carrier but I am happy for all those who do. He did not worry about them folding and now, if they merge, surely all his miles will too. So will any status. He may unload one of the cards, but either way, he keeps earning! I have a feeling if they merge, everyone will be able to add all miles together, just like Air France and KLM Dutchman is saying they will do.

That means all those who have miles on both of these 2 airlines will be happy, if it goes the way I think it will.

Of course, the other side of the coin is the merger could also be a good starting point for both airlines to somehow totally revamp their own mileage structure and do something not so good. This could be the beginning of some new trend where mileage programs as we know them start to unravel. After all, their rival will be Southwest, and they have no "miles" as we know them in the world of the big 6. What if the US/AW merger creates an out for the airlines and they change all their mileage to something new that looks more like Southwest's point structure? Something like this: All customer miles will merge on this date. Then all miles become points on this date... every 1000 = 1 point or 1/2 point, or something... Then all miles are gone, and points become the new currency for both airlines as one.

And if something like that happens, maybe this new entity would become more like a new standard that other partnerships start to take a look at... Next thing you know, all the airlines somehow overhaul their partnerships or create newer ones, and all miles become like southwest points. I don't really like the points thing, but some do. I am just theorizing about what could happen but who knows. We will see...

:)MM

:)MM

They should bring back the PSA name as it has lots less negative baggage than does the US scare name. :D

It will be interesting if this 'event' happens to see what will happen with AWA's alliance with Virgin Atlantic.

Priceless quote from an AP article:

US Airways executives “are more than happy to go back to playing golf as opposed to running an airline that is extremely difficult,” Bronner said, calling America West managers “extremely capable people ... that are well-respected in the industry.”

http://www.msnbc.msn.com/id/7569266/

Don't let the door hit their butts on the way to the links!

Well, if this goes through, it'll be nice to have a Club in LAS (HP has one, even though it's located outside the TSA checkpoint at the A/B Concourses). And it sounds like it'll make SFO and LAX clubs viable again.

Bronner is unbelievable, when dealing with the press. I hope this deal with HP works out and Doug Parker runs the airline.

Don't let the door hit their butts on the way to the links!
And take ALL the lipstick with you when you go. :rolleyes:

Don't let the door hit their butts on the way to the links!

I hear there are some nice courses in AlaBubba. Think I read it in the award winning Attache magazine. ;)

New Article:
http://www.nytimes.com/2005/04/21/business/21place.html?oref=login
1st page:
The chief executive of America West Airline yesterday ticked off a list of reasons a deal involving his airline and US Airways would have better luck than past airline mergers.

Speaking to analysts, America West's chief, W. Douglas Parker, said his airline had already taken steps that would normally follow a deal, like cutting labor costs. While he refused to confirm that his airline was holding talks with US Airways, he said US Airways could weed out planes the two would not need in a combined fleet, something it can easily do since it is operating under bankruptcy protection.

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Further, Mr. Parker maintained that the government, which gave bailouts to both airlines, now wants airlines to solve problems without its help, meaning it might support a merger rather than reject it as anticompetitive, as federal agencies have done in the past.

"There are a number of things that have changed to make whatever happens more successful than in the past," he said.

The combination of America West, the country's eighth-biggest carrier, and US Airways, the seventh largest, would create the sixth-largest carrier. A merged line would be ahead of Southwest Airlines, which is the biggest among the low-fare airlines.

The negotiations were confirmed Monday night by the chairman of US Airways, David G. Bronner, who said the airline, now in its second bankruptcy, was searching for possible partners.

A deal would lead to a new national airline, boasting low costs and promising low fares, with operations divided between the West Coast, where America West is focused, and the East Coast, where US Airways has been a dominant player.

But the country already has such a carrier - namely, Southwest, which has the strongest balance sheet and highest market capitalization in the domestic industry, along with three decades of profitable operations.

By contrast, both America West and US Airways sought government bailouts and have undergone extensive operational overhauls this decade, during which US Airways has twice filed for bankruptcy and remains under Chapter 11 protection. And both airlines ferry many passengers through hubs, although America West has more direct flights.

Even if their combination would create a bigger airline, "how can you compete with Southwest?" asked Philip A. Baggaley, an airline industry analyst with Standard & Poor's Ratings Services.

The skepticism was shared by investors and analysts yesterday, even though America West posted a first-quarter profit of $33.6 million, or 62 cents a share, in contrast to a loss of $1.6 million, or 4 cents a share, a year ago. The first-quarter results included a gain of $60.5 million on fuel-hedging transactions. America West stock dropped 31 cents, or just over 6 percent, to $4.50.

Calyon Securities cut its rating on the airline, which it had raised only last week, while Robert Ashcroft, a UBS analyst, called the combination "unwise" without an influx of outside capital.

"There's limited proof that airline mergers actually work," said Michael Allen, the chief operating officer at Back Aviation Solutions, an industry consulting firm.

William Warlick, an airline industry analyst at Fitch Ratings Services, agreed. "They are messy by their very nature," he said.

But Mr. Parker said yesterday that much of the messiness of past mergers would be absent this time. Both America West and US Airways have attacked wage and benefit costs throughout this decade, reducing the need for further postmerger cuts.

In addition, US Airways has already given up two dozen planes in bankruptcy. And with more than $1 billion owed on the two airlines' packages of federal loan guarantees, the government is less likely to fight a deal as it did a proposed merger of United Airlines and US Airways in 2000.

Mr. Parker, long a proponent of industry consolidation, vowed that his airline would aggressively pursue opportunities. "We at America West do believe that consolidation in the industry is inevitable," he said.

But analysts said the deal under discussion would do little to address his complaints, except to remove one name from airport concourses. For one thing, there is little overlap between the airlines.

Mr. Allen said the proposed combination would be more like two earlier deals: Delta Air Lines' 1985 purchase of Western Airlines, then headed by Delta's current chief executive, Gerald A. Grinstein, and the purchase by US Airways of PSA, a well-regarded West Coast carrier, in 1988.

There is a second page to the above article so click on the link if you want to read it all.

I personally would rather see HP walk away from this deal than give US any say in mgmt. HP's recent Q1 announcement shows the quality of this airline's mgmt team.


1.) The new US, stays a member of the star alliance


I could care less about *A. I'd rather see a strengthening of the HP's OW ties.


4.) Dividend miles survives with some changes TBD. Remember HP's frequent flier program has no support for international and real long-haul flights.

Yet somehow I redeemed SFO-LHR, PHX-LHR tickets in BA F/J/T using HP miles as well as LAX-LHR UC tickets on VS.

To be honest, it doesn't look like this is really a "merger", rather US' creditors buying out HP shareholders and combining the airlines.

Highly unlikely. :rolleyes: That would put US in control, and there's no way Parker and HP's board would hand over the airline like that. I'm sure the HP employees would be absolutely pissed if that happened.

Well if the merger were to happen I wonder what would happen at DCA? Would the new US Airways pick up the DCA PHX slot? Or would those slots open back up like when AA and TWA merged. Would the New US Airways get addtional gates at DCA (the ones that HP have now.)

I've asked this question before, and I don't think anyone really knows, and I don't know if the DOT even knows, because it might depend on how the transaction goes through. In AA/TW, AA was quite clearly the acquiring airline while TW had rights to the slots. HP has the slot rights, so if they are the acquirer I would think they would transfer. But who knows how this transaction will go through. I can't see McCain letting PHX not have any nonstops to DCA, so someone will fly that route at least once a day, but perhaps putting a few of those slots up for grabs again will be a concession the DOT will ask for in order to allow it to go through.

This business of Star not needing UA is funny. Take a look at how many flights feed into JFK, IAD, ORD, LAX, SFO from overseas Star carriers. Compare and contrast that with the number feeding PHX, LAS, PHL, and CLT. They do this deal, and it'll be a quick exit from Star for the combined entity.

I totally agree that Star counts on UA immensely and I can't see Star trying to position a 'backup' to them in case they don't make it. However, I think US/HP will stay in the alliance, as long as HP wants that. (I don't really know if HP only has limited partnerships because they don't want to or because no one wants it with them) The Caribbean/East Coast business traffic is important to Star. I think HP can bring some additional value to Star in the form of Mexico service since Mexicana got kicked out. Plus if HP chucks their partnership with NW in favor of Star, that swings more transpac business out of PHX/LAS and the southwest to UA and Star and away from NW. I can see US reducing the scope of the UA codeshare but it won't be eliminated, and I believe UA/HP will form a limited codeshare to benefit UA's transpac flights and to give HP access to certain markets in the midwest as well as the European/South American destinations that US does not serve.

Besides, Star doesn't say 'no' very often. :D Not with almost 20 members.