US Airways to merge with America West
In a move that may be an indication of the beginning of a new round of US airline mergers, US Airways (#7 in the US in passenger miles) and America West (#8) have agreed to merge. US Airways has major operations in the Eastern United States, while America West's routes cover the Western states. The new company (now reckoned as #5 or #6) will retain the name US Airways.
The merger is a move to save US Airways from bankruptcy. America West, with lower salaries, is in a better situation than the larger carrier, though it, too, has faced recent bankruptcy. Some think this is like two drowning swimmers grabbing on to each other in hopes of being saved.
The last big US airline consolidation was in 2001, when American Airlines acquired bankrupt TWA. US Airways and United Airlines tried to merge in 2001, but were stopped by federal regulators. The most recent major international merger in the industry was Air France/KLM in 2004.
According to an article in the New York Times ("US Airways and America West to Merge, Creating No. 5 Airline", 5/19/2005):
For the past few years, industry executives, including Mr. Parker, America West's chief executive, have contended the industry was sorely in need of consolidation so that it could eliminate excess seats. And, the deal could prompt other airlines to examine whether they need to combine.
In fact, the US Airways move is not likely to make much of difference, as it eliminates few redundant lines or hubs. The real reason may be based on the "too big to fail" strategy. Both companies have had government bailouts and will probably need more. With appeal to legislators form every pat of the company, the company may be looking to getting the same attention from government that rivals United Airlines, Delta, and American are getting. Rather than looking at the numbers on the ledgers for the rationale behind the move, we might better be looking at the numbers on the Congressional roll call.
