General Lee
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Merger talk still simmers at US Airways
In past few weeks, the company's CE0 has twice broached topic.
By Ely Portillo --Charlotte Observer
Thursday, May. 05, 2011
New international flights for 2011: Madrid starts May 13, Dublin May 14, and São Paulo in the fourth quarter.
A year after US Airways' failed merger talks with United, executives at Charlotte's dominant airline continue to talk about a possible merger.
Twice over the past several weeks, CEO Doug Parker - a longtime advocate of industry consolidation - has mentioned a future combination with another carrier, and he gave more details this week during an interview with the Observer.
Any merger could have huge consequences for Charlotte, where US Airways has its largest hub, with nearly 90 percent of the airport's flights and 6,800 employees. Next week, US Airways adds direct flights to Madrid and Dublin from Charlotte.
But consolidation with another airline could put the Charlotte hub at risk.
Since 2008, four of the major carriers have combined - Delta with Northwest and United with Continental - leaving US Airways out.
"There is one big deal left, and that's with US Airways," Parker said last month. "I believe any of the three (major carriers) at the right time could do something with us, if we wanted to and they wanted to."
Parker hit a similar note during an earnings conference call with analysts last week.
In an interview with the Observer this week, Parker wouldn't speculate about which of the remaining carriers could be the best merger candidate, and stressed that he believes US Airways can survive indefinitely on its own.
Parker told the Observer the airline has shown it can be a viable, stand-alone company - but that it wants to be in a "position where we can control our own destiny," including merging if it wants.
The last decade has been tumultuous for US Airways: two bankruptcies, three failed merger attempts and one combination with another carrier.
But since last year, US Airways' financial condition has improved markedly. The airline reversed years of losses to post a nearly $450-million profit in 2010.
The carrier also improved its rankings for measures such as on-time arrivals.
US Airways lost about $110 million in the first quarter, a period in which airlines were hit hard by rising fuel prices. The industry as a whole lost more than $1 billion.
Merger synergies
In 2005, America West merged with US Airways, which was in bankruptcy.
The combination saved US Airways but left a bitter labor dispute between the two companies' pilots that persists to this day.
Since then, US Airways has been in three potential mergers, once with Delta and twice with United.
The airline says it has a revenue disadvantage compared with its major competitors. Its hub cities in Charlotte, Phoenix and Philadelphia aren't as lucrative as competitors' markets such as Atlanta, New York City or Chicago, the company says.
And US Airways has far fewer money-making international routes - where it faces less competition from low-cost carriers - than the other major airlines.
The airline says it makes up for generating less revenue primarily by saving costs on employee pay and benefits.
Being folded into one of the big three legacy carriers could ease the revenue disadvantage.
Bob Mann, an airline consultant based in Port Washington, N.Y., said that US Airways has shown it can make money on its own, even in tough times - but could definitely make more if it merged.
"The way I see it, there's not a necessity, but there is an opportunity ... the combination of networks brings a lot of synergies that US Airways can't achieve on its own by organic growth," he said.
Mike Flores, head of US Airways' flight attendants' union, said Parker is correct about the likelihood of a merger.
"He's right; there is one big merger left," Flores said. "Who it will be with is anybody's guess." A bigger, merged airline could offer more long-term job stability for US Airways' workers, he said.
US Airways currently has serious labor challenges. The pilot and flight attendant unions still haven't been consolidated after the America West merger. That's led to harsh rhetoric and no new contracts after more than five years.
But Parker told the Observer those wouldn't be a major barrier to a deal, should one arise.
"We were very close to a merger with United that would have happened if Continental hadn't injected itself, and those issues existed then," he said.
Challenges to a merger
Despite the possible benefits, other airlines may be cautious about taking the plunge with US Airways.
Seth Kaplan, who publishes Aviation Weekly, said a merger down the road makes some sense.
"The fact that they're interested in it makes it more likely," Kaplan said. "The problem you have to ask is, what does US Airways add? And as they themselves know, they don't have the best airport real estate.
"US Airways does a pretty good job, but what they have is limited. Nobody is looking for a hub in Phoenix," Kaplan said. US Airways' lack of Pacific flights is also a potential deterrent.
Mann said each merger scenario also presents unique challenges.
United isn't likely to merge with another airline until its integration with Continental is complete, and that will take an additional two years, Mann said. Delta is in another international airline alliance.
And American, the only major airline not to undergo a merger recently, has serious labor problems and was the only major carrier to lose money last year.
US Airways' labor problems, which have "no prospects near-term of getting resolved," could be a turn-off for a potential partner, Mann said.
When and if a merger happens, it could affect Charlotte's hub. A merger with Delta is most likely to affect Charlotte because of Delta's Atlanta hub, Kaplan said.
Delta would probably have the most immediate savings to realize by reducing flights from Charlotte. But regulators are likely to take a hard look at the deal because of that, Kaplan said.
After US Airways phased out its Pittsburgh hub in 2004, that city lost hundreds of daily flights and thousands of jobs.
Parker said Charlotte is "an extremely important part of the US Airways network, and always will be." Since America West's merger with US Airways, the airline has added flights in Charlotte, and cut flights out of Phoenix, which had been an America West hub.
"I can't say enough great things about US Airways' view of Charlotte as to growth," Parker said. "We'd like to see that continue."
Bye Bye---General Lee
In past few weeks, the company's CE0 has twice broached topic.
By Ely Portillo --Charlotte Observer
Thursday, May. 05, 2011
New international flights for 2011: Madrid starts May 13, Dublin May 14, and São Paulo in the fourth quarter.
A year after US Airways' failed merger talks with United, executives at Charlotte's dominant airline continue to talk about a possible merger.
Twice over the past several weeks, CEO Doug Parker - a longtime advocate of industry consolidation - has mentioned a future combination with another carrier, and he gave more details this week during an interview with the Observer.
Any merger could have huge consequences for Charlotte, where US Airways has its largest hub, with nearly 90 percent of the airport's flights and 6,800 employees. Next week, US Airways adds direct flights to Madrid and Dublin from Charlotte.
But consolidation with another airline could put the Charlotte hub at risk.
Since 2008, four of the major carriers have combined - Delta with Northwest and United with Continental - leaving US Airways out.
"There is one big deal left, and that's with US Airways," Parker said last month. "I believe any of the three (major carriers) at the right time could do something with us, if we wanted to and they wanted to."
Parker hit a similar note during an earnings conference call with analysts last week.
In an interview with the Observer this week, Parker wouldn't speculate about which of the remaining carriers could be the best merger candidate, and stressed that he believes US Airways can survive indefinitely on its own.
Parker told the Observer the airline has shown it can be a viable, stand-alone company - but that it wants to be in a "position where we can control our own destiny," including merging if it wants.
The last decade has been tumultuous for US Airways: two bankruptcies, three failed merger attempts and one combination with another carrier.
But since last year, US Airways' financial condition has improved markedly. The airline reversed years of losses to post a nearly $450-million profit in 2010.
The carrier also improved its rankings for measures such as on-time arrivals.
US Airways lost about $110 million in the first quarter, a period in which airlines were hit hard by rising fuel prices. The industry as a whole lost more than $1 billion.
Merger synergies
In 2005, America West merged with US Airways, which was in bankruptcy.
The combination saved US Airways but left a bitter labor dispute between the two companies' pilots that persists to this day.
Since then, US Airways has been in three potential mergers, once with Delta and twice with United.
The airline says it has a revenue disadvantage compared with its major competitors. Its hub cities in Charlotte, Phoenix and Philadelphia aren't as lucrative as competitors' markets such as Atlanta, New York City or Chicago, the company says.
And US Airways has far fewer money-making international routes - where it faces less competition from low-cost carriers - than the other major airlines.
The airline says it makes up for generating less revenue primarily by saving costs on employee pay and benefits.
Being folded into one of the big three legacy carriers could ease the revenue disadvantage.
Bob Mann, an airline consultant based in Port Washington, N.Y., said that US Airways has shown it can make money on its own, even in tough times - but could definitely make more if it merged.
"The way I see it, there's not a necessity, but there is an opportunity ... the combination of networks brings a lot of synergies that US Airways can't achieve on its own by organic growth," he said.
Mike Flores, head of US Airways' flight attendants' union, said Parker is correct about the likelihood of a merger.
"He's right; there is one big merger left," Flores said. "Who it will be with is anybody's guess." A bigger, merged airline could offer more long-term job stability for US Airways' workers, he said.
US Airways currently has serious labor challenges. The pilot and flight attendant unions still haven't been consolidated after the America West merger. That's led to harsh rhetoric and no new contracts after more than five years.
But Parker told the Observer those wouldn't be a major barrier to a deal, should one arise.
"We were very close to a merger with United that would have happened if Continental hadn't injected itself, and those issues existed then," he said.
Challenges to a merger
Despite the possible benefits, other airlines may be cautious about taking the plunge with US Airways.
Seth Kaplan, who publishes Aviation Weekly, said a merger down the road makes some sense.
"The fact that they're interested in it makes it more likely," Kaplan said. "The problem you have to ask is, what does US Airways add? And as they themselves know, they don't have the best airport real estate.
"US Airways does a pretty good job, but what they have is limited. Nobody is looking for a hub in Phoenix," Kaplan said. US Airways' lack of Pacific flights is also a potential deterrent.
Mann said each merger scenario also presents unique challenges.
United isn't likely to merge with another airline until its integration with Continental is complete, and that will take an additional two years, Mann said. Delta is in another international airline alliance.
And American, the only major airline not to undergo a merger recently, has serious labor problems and was the only major carrier to lose money last year.
US Airways' labor problems, which have "no prospects near-term of getting resolved," could be a turn-off for a potential partner, Mann said.
When and if a merger happens, it could affect Charlotte's hub. A merger with Delta is most likely to affect Charlotte because of Delta's Atlanta hub, Kaplan said.
Delta would probably have the most immediate savings to realize by reducing flights from Charlotte. But regulators are likely to take a hard look at the deal because of that, Kaplan said.
After US Airways phased out its Pittsburgh hub in 2004, that city lost hundreds of daily flights and thousands of jobs.
Parker said Charlotte is "an extremely important part of the US Airways network, and always will be." Since America West's merger with US Airways, the airline has added flights in Charlotte, and cut flights out of Phoenix, which had been an America West hub.
"I can't say enough great things about US Airways' view of Charlotte as to growth," Parker said. "We'd like to see that continue."
Bye Bye---General Lee
