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http://www.thedeal.com/NASApp/cs/CS?pagename=NYT&c=TDDArticle&cid=1113424103124
Article:
The airline industry is abuzz with talk that bankrupt US Airways Group Inc., in search of funding needed to complete its reorganization, is in talks with America West Holdings Corp. for financing that could speed the pace of consolidation in the domestic airline sector.
US Airways already has secured commitments for $125 million apiece from small-jet operators Air Wisconsin Airlines Corp. and Republic Airways Holdings Inc.
Industry sources said that Tempe, Ariz.-based America West, operator of the nation's eighth-largest airline, could be interested in providing the remainder of the funding US Airways needs. Any deal between the two companies would probably fall well short of a merger, with the airlines likely agreeing to a code-sharing alliance to coordinate schedules and sell tickets on each other's flights.
US Airways said in a written statement that, given high fuel prices and the weak revenue environment, "We would expect that all airlines are exploring ways to remain competitive," although the company refused to respond to speculation regarding potential investors and business partners.
An America West representative also declined comment. In recent months, however, the company has been a vocal advocate of industry consolidation. CEO Douglas Parker in February told a group of reporters that there are "too many seats flying around in our industry," adding that he believed America West would "play a part in consolidation when it happens."
The company last year examined investing in bankrupt ATA Airlines Inc., an airline that eventually signed an equity and code-sharing deal with Southwest Airlines Co.
Industry analysts said America West could certainly benefit from boosting its presence on the East Coast, home to many of the most trafficked, and most lucrative, domestic markets. The company has a strong West Coast franchise thanks to its hubs in Las Vegas and Phoenix but has had a diminished presence in the East since shutting its small hub operation in Columbus, Ohio, in June 2003.
The company today primarily flies to Eastern cities only from its Western hubs. US Airways, by contrast, does very little flying west of the Mississippi River. Both airlines have also been expanding southward, building routes to tourist destinations in Latin America and the Caribbean.
Another link between the two companies is Phoenix-based Mesa Air Group Inc., which operates small-jet services under both the US Airways Express and America West Express banners. Mesa has strong ties to America West, having participated in that company's 1993 reorganization. It also potentially has a lot to lose in a US Airways reorganization, as Air Wisconsin and Republic could take flying opportunities away from Mesa if they invest money in the company and Mesa stays on the sidelines.
But there are a number of hurdles that would stand in the way of a deal between America West and US Airways. It is unclear that America West could afford to invest in another carrier without outside help. J.P. Morgan Chase & Co. analyst Jamie Baker said last week that the airline could face a cash crunch of its own by year's end.
America West, which ended 2004 with about $300 million in unrestricted cash and investments, could see its funds drop to about $60 million this year if oil prices remain high. Baker estimated that the airline would need to raise a minimum of $100 million to avoid problems.
An industry source suggested that America West might turn to a private equity investor to raise a comfortable cushion for itself and money to put into US Airways. Or a fund could invest directly in both America West and US Airways and let those companies work out an alliance on their own.
Another issue would be US Airways' existing code share with bankrupt United Air Lines Inc., like US Airways a member of the international Star Alliance. United has one of the strongest route networks in the western U.S.
US Airways is unlikely to do anything to jeopardize its membership in Star, the source said, which brings the company important feeder traffic from trans-Atlantic flights by partners. But United, which is undergoing its own reorganization, would presumably hate to see US Airways passengers transferring to a rival's planes instead of its own.
Article:
The airline industry is abuzz with talk that bankrupt US Airways Group Inc., in search of funding needed to complete its reorganization, is in talks with America West Holdings Corp. for financing that could speed the pace of consolidation in the domestic airline sector.
US Airways already has secured commitments for $125 million apiece from small-jet operators Air Wisconsin Airlines Corp. and Republic Airways Holdings Inc.
Industry sources said that Tempe, Ariz.-based America West, operator of the nation's eighth-largest airline, could be interested in providing the remainder of the funding US Airways needs. Any deal between the two companies would probably fall well short of a merger, with the airlines likely agreeing to a code-sharing alliance to coordinate schedules and sell tickets on each other's flights.
US Airways said in a written statement that, given high fuel prices and the weak revenue environment, "We would expect that all airlines are exploring ways to remain competitive," although the company refused to respond to speculation regarding potential investors and business partners.
An America West representative also declined comment. In recent months, however, the company has been a vocal advocate of industry consolidation. CEO Douglas Parker in February told a group of reporters that there are "too many seats flying around in our industry," adding that he believed America West would "play a part in consolidation when it happens."
The company last year examined investing in bankrupt ATA Airlines Inc., an airline that eventually signed an equity and code-sharing deal with Southwest Airlines Co.
Industry analysts said America West could certainly benefit from boosting its presence on the East Coast, home to many of the most trafficked, and most lucrative, domestic markets. The company has a strong West Coast franchise thanks to its hubs in Las Vegas and Phoenix but has had a diminished presence in the East since shutting its small hub operation in Columbus, Ohio, in June 2003.
The company today primarily flies to Eastern cities only from its Western hubs. US Airways, by contrast, does very little flying west of the Mississippi River. Both airlines have also been expanding southward, building routes to tourist destinations in Latin America and the Caribbean.
Another link between the two companies is Phoenix-based Mesa Air Group Inc., which operates small-jet services under both the US Airways Express and America West Express banners. Mesa has strong ties to America West, having participated in that company's 1993 reorganization. It also potentially has a lot to lose in a US Airways reorganization, as Air Wisconsin and Republic could take flying opportunities away from Mesa if they invest money in the company and Mesa stays on the sidelines.
But there are a number of hurdles that would stand in the way of a deal between America West and US Airways. It is unclear that America West could afford to invest in another carrier without outside help. J.P. Morgan Chase & Co. analyst Jamie Baker said last week that the airline could face a cash crunch of its own by year's end.
America West, which ended 2004 with about $300 million in unrestricted cash and investments, could see its funds drop to about $60 million this year if oil prices remain high. Baker estimated that the airline would need to raise a minimum of $100 million to avoid problems.
An industry source suggested that America West might turn to a private equity investor to raise a comfortable cushion for itself and money to put into US Airways. Or a fund could invest directly in both America West and US Airways and let those companies work out an alliance on their own.
Another issue would be US Airways' existing code share with bankrupt United Air Lines Inc., like US Airways a member of the international Star Alliance. United has one of the strongest route networks in the western U.S.
US Airways is unlikely to do anything to jeopardize its membership in Star, the source said, which brings the company important feeder traffic from trans-Atlantic flights by partners. But United, which is undergoing its own reorganization, would presumably hate to see US Airways passengers transferring to a rival's planes instead of its own.
