http://www.eastvalleytribune.com/index.php?sty=40162
US Airways has a history of marital problems By Tom Gibbons, TribuneOnce upon time, there was an airline that painted smiles on its planes. Then after a merger, there were no more smiles. On the planes or anywhere else.The airline was Pacific Southwest Airlines, a regional carrier with routes in California and the Northwest. Pacific Southwest Airlines was acquired in the late 1980s by an eastern airline, then known as USAir and now known as US Airways. USAir didn’t have much of a presence in the West, so it seemed like a good fit. At about the same time, USAir, which was highly profitable, bought another regional carrier, Piedmont Aviation.
So here you had one of the stars of the airline industry with a chance for a national presence. It seemed like a great idea at the time.
It turned into one of those mergers that wind up in business school texts as a how-not-to example.
One of the problems was USAir decided to put all the folks from low-cost Pacific Southwest Airlines and Piedmont Aviation on the same pay scale as USAir personnel.
By 1989, the bigger, bloated USAir was losing money. By 1993, it had the highest cost structure in the industry. It was forced to abandon its Western routes.
This is offered as a cautionary tale.
Last week, we found out there may be a sequel. US Airways is looking for a merger partner. And the company has been talking to Tempe-based America West Airlines. Our hometown airline offers western routes. And some financial stability.
Of course, things are a little different now from back in the late 1980s.
In a conference call Wednesday announcing America West’s first-quarter earnings — and a surprise profit — CEO Doug Parker wouldn’t comment directly on a merger with US Airways. But he said unions, airplane-makers and regulators are more amenable to making airline mergers work.
"You end up with larger net synergy than I think you’ve ever seen before,’’ he said.
That’s one difference. Another is this: US Airways is a mess and has been for years. The company is in bankruptcy, its second trip this decade.
Airline analysts seem downright puzzled on how a merger would make sense, especially for America West. The cultures are so different. And this isn’t a case of strong financial player pairing with a weak one. America West is stronger, but that is a relative measurement.
The belief here is east Phoenix-based Mesa Air CEO Jonathan Ornstein is somehow pushing for an alliance between America West and US Airways. Mesa is in the unglamorous business of flying connecting routes to smaller cities for big airlines. But his airline, unlike most, is profitable — as an airline. Even though America West turned a profit in the first quarter, it did so because its jet fuel hedging business made up for the airline’s losses. Ornstein’s two biggest partners are America West and US Airways. Parker and Ornstein are said to be two of the smartest executives in the industry.
Maybe they see an opportunity no one else sees. Maybe they are overlooking a risk everyone else sees.Contact Tom Gibbons by email, or phone (480) 898-6815
US Airways has a history of marital problems By Tom Gibbons, TribuneOnce upon time, there was an airline that painted smiles on its planes. Then after a merger, there were no more smiles. On the planes or anywhere else.The airline was Pacific Southwest Airlines, a regional carrier with routes in California and the Northwest. Pacific Southwest Airlines was acquired in the late 1980s by an eastern airline, then known as USAir and now known as US Airways. USAir didn’t have much of a presence in the West, so it seemed like a good fit. At about the same time, USAir, which was highly profitable, bought another regional carrier, Piedmont Aviation.
So here you had one of the stars of the airline industry with a chance for a national presence. It seemed like a great idea at the time.
It turned into one of those mergers that wind up in business school texts as a how-not-to example.
One of the problems was USAir decided to put all the folks from low-cost Pacific Southwest Airlines and Piedmont Aviation on the same pay scale as USAir personnel.
By 1989, the bigger, bloated USAir was losing money. By 1993, it had the highest cost structure in the industry. It was forced to abandon its Western routes.
This is offered as a cautionary tale.
Last week, we found out there may be a sequel. US Airways is looking for a merger partner. And the company has been talking to Tempe-based America West Airlines. Our hometown airline offers western routes. And some financial stability.
Of course, things are a little different now from back in the late 1980s.
In a conference call Wednesday announcing America West’s first-quarter earnings — and a surprise profit — CEO Doug Parker wouldn’t comment directly on a merger with US Airways. But he said unions, airplane-makers and regulators are more amenable to making airline mergers work.
"You end up with larger net synergy than I think you’ve ever seen before,’’ he said.
That’s one difference. Another is this: US Airways is a mess and has been for years. The company is in bankruptcy, its second trip this decade.
Airline analysts seem downright puzzled on how a merger would make sense, especially for America West. The cultures are so different. And this isn’t a case of strong financial player pairing with a weak one. America West is stronger, but that is a relative measurement.
The belief here is east Phoenix-based Mesa Air CEO Jonathan Ornstein is somehow pushing for an alliance between America West and US Airways. Mesa is in the unglamorous business of flying connecting routes to smaller cities for big airlines. But his airline, unlike most, is profitable — as an airline. Even though America West turned a profit in the first quarter, it did so because its jet fuel hedging business made up for the airline’s losses. Ornstein’s two biggest partners are America West and US Airways. Parker and Ornstein are said to be two of the smartest executives in the industry.
Maybe they see an opportunity no one else sees. Maybe they are overlooking a risk everyone else sees.Contact Tom Gibbons by email, or phone (480) 898-6815
