US Airways-America West Deal Seen as Precursor
RENEE MONTAGNE, host:
Time now for business news. Today, airlines and pensions.
US Airways and America West plan to merge, becoming the nation's sixth largest airline. Some analysts wonder whether the deal is too risky. Others say the merger may be a start of a long-overdue consolidation in the airline industry. NPR's Jack Speer reports.
JACK SPEER reporting:
By agreeing to merge, US Airways and smaller America West each get something they desperately want. US Airways, which has been struggling to fend off challenges from Southwest, finds a way out of bankruptcy. America West gets the scale it needs to compete nationally. America West CEO Doug Parker, who will head the merged airlines, says the deal makes sense even at a time many of the airlines are facing high fuel prices.
Mr. DOUG PARKER (CEO, America West): We've been able to create a business model that works even with oil prices at $50 per barrel, which has been our goal from the start. That is driven by over $600 million of annual synergies between the two airlines.
SPEER: Those synergies would eventually include an unspecified number of layoffs, moving the airlines' headquarters to Arizona and flying fewer planes. Pilots' groups yesterday were already beginning to jockey for position in the merged airline, which will retain the US Airways name. However, the carriers said they will start off slowly for at least the next several years operating with both separate flight and maintenance crews. Michael Boyd is an aviation industry consultant with The Boyd Group. He says the deal is complicated, but he says trying to combine two airlines with such different cost structures quickly would have been a disaster.
Mr. MICHAEL BOYD (The Boyd Group): I believe what these people have done is they've taken a clean sheet of paper and said, `If we had the assets of US Airways and the assets of America West, how do we put them together in a way that made something entirely new?' I think that's what they're looking at, is how do we restructure this into something that's viable as a whole?
SPEER: But other analysts say the deal was driven in large part by US Airways creditors and others hoping to profit from a merger. Air Canada, which hopes to land deals with the merged airline, and European airplane builder Airbus both helped provide part of the $1 1/2 billion in financing for the deal. Richard Aboulafia is an analyst for the Teal Group.
Mr. RICHARD ABOULAFIA (Teal Group): It confirms that everyone is making money off the US airline industry except, of course, for the US airlines themselves.
SPEER: Still, there are some who say the merger may help the airline industry by taking some excess capacity out of the system at a time almost all the major airlines, with the exception of Southwest, are losing money. The merger, which is subject to various regulatory approvals, is expected to close by the fall. Jack Speer, NPR News, Washington.
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