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US Airways-America West Merger on Course, Executives Insist

May 19, 2005
The US Airways-America West merger is on course, executives insist. US Airways Chairman David Bronner is quoted by one source, Bloomberg News, as saying the merger talks are so far along that a collapse "is not really an option."

USAirways-America West • It's Official: East Met West • Merger Gets Loan Board Approval • Merger Announced • Merger on Course, Executives Insist • Merger May Be Near • US Airways, America West Far Along in Merger Talks --- • America West • US Airways

The Charlotte Observer reports that federal officials have been briefed on the merger plans and that an announcement could come at any time. The newspaper said the Air Transportation Stabilization Board, which would have to back the large loans to both carriers, is scheduled to meet Friday.

A merger with America West appears to be US Air's best hope of salvation at the moment. The company, bankrupt for the second time, warned at one point late last year that it could be forced to liquidate. Analysts say the combination of US Air's eastern U.S. routes and America West's west coast service could make the combined airline a significant force.

The carriers are reportedly still trying to put together the financing for the deal. Possible sources include aircraft manufacturers, hedge funds and even other airlines, including feeder carriers.

Since US Airways is in bankruptcy, any deal would be subject to approval from both the courts and regulatory agencies. It also means that a deal with America West would have to be the best deal for US Airways stockholders and creditors. If another airline decided to step in with a better offer, it could derail the merger.

While US Airways has been a financial train wreck for several years, America West has problems of its own. Industry analysts say the carrier faces a looming cash crunch, which could arrive in early 2006. A merger with US Airways might relieve some of the pressure. Both airlines would likely cut payrolls and reduce the number of planes in their fleets to avoid overlapping service.

The potential merger, according to US Airways, could save the companies $600 million a year.

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