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US Airways, America West in advanced merger talks - WSJ

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Booker said:
One point: Because AA was not an ALPA carrier, ALPA merger and fragmentation policy did not apply in the TWA merger as it would in an HP/US merger.

Well that's true, but more importantly the TWA pilots conceded their contractual integration protections for a ALPA/Non-ALPA integration just prior to their acquisition. With no contractual protections, the TWA pilots were left to the good graces (or lack there of) of the APA.
 
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I think in the long run this merger will be good for both companies. Combined AWA and U will be able to better compete with Delta in the east and United in the west.

GECAS is picking who the winners will be.
 
I know it’s a very contentious issue and I’m not trying to stir anything up.

However just out of curiosity, for those of you who were around when other airlines merged, which name do you think they would pick? Or would they merge names too, for example:

AmericaAir ? Or USwest Airlines? …? I mean, how do they choose?
 
Several weeks ago the rumors had AirTran and Midex involved in this mess . . . I say "mess" in regards to integration issues . . . as for its corporate viability- I think it would have a chance with AWA management. . . if the USAirways management prevails, well, you don't havw to be a rocket surgeon to see the lowecur in the punch bowl on this one.

Also, if FL was in on this and bowed out, it kind of tells you what they thought of it. . . . .
 
US West?????

What do you get when you mix two small/medium companies with somewhat crap cash flow in highly competitive markets? One big company with crap cash flow in highly competitive markets... I can understand the complementary geographic coverage and the somewhat fleet overlap, but neither company is super-healthy right now, especially with high fuel costs that might stick around and very thin margins in highly competitive markets.

I guess if you are an ex-mainline pilot flying the E-170 at MDA you can probably look forward to getting back on the Bus or 737 at US West... That would be good news for some. If this happens it is going to get very complicated and contentious among the pilots - no doubt!!!!! Good luck!
 
I think the name would be "Out'a Business Air". After going through this with TWA, I'm almost physically sick to my stomach. Just look at the animosity that still exists between 2 sides when neither even works for the company anymore. I'm still holding out hope that AWA mgmt gets it and this is just a rumor. "IT" being employees make the airline. A combination of these 2 employee groups would be a disaster taking whatever it's called down the drain. I couldn't imagine a more efficient way to suddenly and dramatically worsen morale and put a death nail in both airline's coffin's.


I can't shake this bad feeling that I should get off here and dust off the log book and freshen up the resume.
 
I think a USAir/AWA merger would dramatically weaken AWA. The amount of debt and turmoil that USAir would bring to the table wouldn't be overcome by a short term strategic hub and spoke system advantage. AWA would not stop the USAir blood bath on the east coast being dished out primarily from Southwest, Jetblue and Airtran. And USAir is certainly in no position to add anything to AWA's already descent but vulnerable position in the West with Southwest, Frontier, and Ted. I think AWA would be making a serious mistake to merge with USAir, better to wait/hope USAir liquidates and position yourself to grab assets.

As a matter of fact....can they even technically do a merger? I mean I know that USAir can sell off assets, but can a company in Chapter 11 bankruptcy protection technically "merge" with another solvent carrier? Maybe one of the business types on here can answer that question.
 
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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; Page A1

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 step in a long-awaited new wave o 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, moving into the industry as investors, will eventually 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
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Chairman: David Bronner

CEO, President: Bruce Lakefield

Major Hubs: Charlotte / Douglas, North Carolina; Philadelphia

Destinations: Serves 182 airports in the U.S., Europe and Caribbean, with 3,300 flights daily

2004 Revenue: $7.12 billion

2004 Net Loss: $611 million

US Airways extended its second round of bankruptcy-court protection and negotiated with its unions cuts to pay and benefits, which should save more than $1 billion in annual labor costs -- the level management said was necessary to be viable in an increasingly cutthroat industry. Thousands of ground workers are expected to lose their jobs as part of the deal hammered out with the machinists union. Employee morale is low, which manifested itself in massive sickouts over the Christmas holiday, which, coupled with winter storms, slammed the carrier with 400 canceled flights and thousands of pieces of lost luggage. In March, the Arlington, Va.-based carrier reached an agreement with regional-airline operator Republic Airways and its majority shareholder for a $125 million equity investment after US Airways emerges from bankruptcy-court protection.

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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.

AMERICA WEST
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Chairman, president, CEO: W. Douglas Parker

Major Hubs: Phoenix, Ariz.; Las Vegas

Destinations: Serves about 95 destinations across the U.S., Mexico, Canada and Costa Rica, with more than 900 daily departures.

2004 Revenue: $2.34 billion

2004 Net Loss: $89.9 million

America West is among the low-cost carriers that have put pressure on larger rivals with lower labor costs and cheaper fares. The Tempe, Ariz.-based carrier has aggressively sold first-class seats at affordable prices to lure passengers and began offering a "bill me later" option, which defers payment for 90 days, on its Web site. The carrier posted a loss in 2004 and warned of a tough year ahead, a further sign -- on top of a bankruptcy-protection filing by rival ATA and a disappointing third quarter for JetBlue -- that low-cost carriers aren't immune to the industry's woes. In January, the carrier pulled out of three of the five transcontinental markets it served with nonstop flights, citing "irrational" fare responses from competitors following the discounter's entry into these markets with lower fares.

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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.

Write to Susan Carey at [email protected] and Melanie Trottman at [email protected]
 
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.


Oh my god, are these people that stupid ? That is what the combined USAirways/Piedmont/PSA looked like in 1989. USAirways management managed to screw it up royally and ended up pulling out of the west coast, completely dismantling the former PSA over a number of years.

This idea is very bad for America West, and that is coming from a furloughed USAirways pilot. If I was an America West pilot I would be screaming bloody murder if this went through.


Typhoonpilot
 
Yes, Typhoon, and nothing ever changes, the past always equals the future, and everyone knows that AWA pilots have the brightest, most secure future of anyone in commercial aviation. Right, and while we are at it, let's just buy hook, line, and sinker every negative news report on USAir spewed in the past five years.

This could be a great merger. My only questions are: What are we gonna call it? And, what's the new paint gonna be (?), because that Navy Blue ain't gonna work in PHX!
 
So tell me what is the fleet comonality here? Even the A320's have different engines
 
Why would one weak company purchase or merge with a BK'ed one? There is money to be made somewhere up the food chain, but not down at the employee level.
 
Selfish question here...

What do you all think a potential merger might mean for the multitude of furloughed US Airways pilots?

In my case, as a furloughee, my family and I non-rev on US Airways a lot. I don't expect a recall for a very long time (if ever) -- and, if they do recall to my seniority, I can't say I would be sure to take it (I've got a pretty good gig going now). But, I would like to retain my seniority, recall rights, and pass privileges there.

Thoughts?
 
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On a side note, how did they get the symbol HP for America West? I can't find it anywhere online. When I first started working in aviation, I asked myself why does Hewlett Packard have an airline? Thanks-
 
typhoonpilot said:
Oh my god, are these people that stupid ? That is what the combined USAirways/Piedmont/PSA looked like in 1989. USAirways management managed to screw it up royally and ended up pulling out of the west coast, completely dismantling the former PSA over a number of years.

This idea is very bad for America West, and that is coming from a furloughed USAirways pilot. If I was an America West pilot I would be screaming bloody murder if this went through.


Typhoonpilot

Speculate AW and U competitors sure hope the merger goes through.
 
michael707767 said:
DOH is not even in the ALPA merger policy anymore. Give it up.

Sure it is..........between ALPA carriers....if you are looking at TWA/AA, they were 2 separate unions, hence the turmoil.
 
I wonder how much of an extension US airways will look for if this deal does not go through.

USTSB: So, usair, after all your extensions are you ready to submit a viable business plan to exit ch. 11?

USAIR: No, we put our efforts into mergers and since they did not pan out we are back at square one.

USTSB: OK, take another couple of months, get back to us when you can. Break. Ok, what's for lunch people, I have to eat before my golf game on the taxpayers dollar. Let's have a smoke first though.
 

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