United, US Airways in code-share talks

pb4ufly

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CHICAGO, June 18 (Reuters) -

United Airlines and US Airways are close to code sharing deal that could provide both struggling carriers with benefits of last year's failed $12 billion merger without actually combining the two airlines, several sources familiar with the matter said.

But any potential deal between two of the biggest U.S. airlines to share revenue through such a marketing arrangement, common throughout the industry, would require approvals on a number of levels and is far from complete, they said.

On top of the list is getting pilots at both airlines to agree.

Under code-share arrangements, one airline is allowed to place its two-letter code on another airline's flights in computer reservation systems and through a complicated system of reimbursement derive revenue it otherwise would not get.

United and US Airways announced a merger, hailed as a great combination by some and sharply criticized by others, in October, 2000. But the Department of Justice said it would sue to stop the deal in July, 2001, and it fell apart.

The merger was one of the key endeavors by James Goodwin, then UAL Chief Executive ousted by angry unions after he sent a letter to employees saying the airline could perish unless financial losses stopped.

UAL Corp. (NYSE:UAL - News), parent of United, and US Airways Group Inc. (NYSE:U - News) have both lost billions of dollars since the Sept. 11 attacks involving four commercial jets. Although air traffic has rebounded, it remains below year-ago levels.

US Airways, based in Arlington, Virginia, has already filed for federal loan guarantees that were part of last year's historic bailout of the airline industry. Without labor concessions, the No. 6 U.S. airline has said it could file for bankruptcy protection.

United, the second largest U.S. airline, is getting to file an application for backing of private sector loans if it gets concessions it also wants from labor.

PILOTS HOLD THE KEY

Getting pilots at both airlines to approve the code-share deal by waiving portions of their contracts that deal with seniority issues is particularly difficult, especially given the negative outcome of the failed United/US Airways merger.

"It's a real hot button," said one source.

But concession packages proposed by management to pilots at both carriers includes the code-share proposal, sources said.

United, with a broad network of both international and domestic routes, is weak on the East Coast with few flights.

US Air, with a strong East Coast presence, has pulled out of a number of other markets after it embarked upon a plan to shrink itself last year even before the Sept. 11 attacks.

Pilots at US Airways have agreed to give up about two-thirds of the $595 million in annual pay cuts, while those at United last week struck a tentative deal with management to give up about 10 percent of wages in return for stock options.

Sources told Reuters other provisions of the United pilots deal -- which must be voted on by pilot union leadership and some 9,000 members -- include increasing the number of regional jets that United could fly in addition to the code-share proposal.

US Airways was known to be speaking to a number of different airlines about potential code-sharing as it seeks ways to bring in cash and cut its costs, too. The Arlington, Virginia-based airline had a cash pool of just over $500 million at the end of the first quarter.

"US Air is talking to everybody right now," said another industry source. "There's nobody they're not calling."

The same source predicted that US Airways will "get something from somebody." But he said code-sharing deals "are very unstable" and "generally they don't last long."

But a current code-share deal between Continental Airlines (NYSE:CAL - News) and Northwest Airlines (NasdaqNM:NWAC - News) has been cited as one success that part of any potential US Air/UAL deal could use as a model.
 

HvyjetFO

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Can't see it happening

This door was left open on our ERP. I don't see it happening. With pilots on the street and the proposal for additonal RJs, there is no way either side will agree to more outsourcing. I know our pilot group is outraged by this, as I am sure those at USAirways are. IMHO, this issue will be a deal breaker for any ERP proposal.

HVY
 

B1900DFO

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HvyJetFO,
I sure hope you're right and you guys vote it down. If the deal goes through I can't imagine UAL hiring for years when they can get the additional RJ drivers to do the work for peanuts.
 

reepicheep

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B1900DFO said:
HvyJetFO,
I sure hope you're right and you guys vote it down. If the deal goes through I can't imagine UAL hiring for years when they can get the additional RJ drivers to do the work for peanuts.
I'm one of those potential RJ-drivers now employed by "mainline" US Airways. I feel you are correct in your assesment. We are about to see our pay levels drop by 30% to well-below industry standard - below what CAL and SWA will be paid. No one I know at US Airways wants a code share with UAL, and I believe most of their pilots feel the same. These two airlines need to cut the cord once and for all and move on with their lives, separately.
 
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