US Airways, America West agree to merge

associated press ^ | May 19, 2005 | JACQUES BILLEAUD and MATT BARAKAT

[Dog Gone]

PHOENIX — US Airways Group Inc. and America West Holdings Corp., the nation's seventh and eighth largest carriers, said today that they are merging.

The combined company, which will operate under the name US Airways, will be funded by $1.5 billion in new capital from a variety of investors, including aircraft maker Airbus.

The goal of the merger is to stitch together two geographically distinct carriers with a history of financial struggles into a stronger airline that would compete better with lower-cost rivals such as Southwest Airlines Inc. and JetBlue Airways Corp.

"Building upon two complementary networks with similar fleets, closely aligned labor contracts and two outstanding teams of people, this merger creates the first nationwide full service low-cost airline," said Doug Parker, chief executive and president of America West Holdings. "Through this combination, we are seizing the opportunity to strengthen our business rather than waiting for the industry environment to improve."

US Airways President and CEO Bruce Lakefield said the merger will ensure US Airways' long-term viability and the security of its employees.

US Airways, which last year made its second trip into bankruptcy in two years, slashed worker pay by $1 billion a year and shed $3 billion in pension obligations.

The Arlington, Va.-based carrier said its goal was to reinvent itself as a low-cost carrier like Jet Blue or America West. But even after the cost reductions, the airline struggled as fuel costs soared and low-fare competitors drove ticket prices down.

America West, which was founded in 1983 and is based in Tempe, Ariz., operates flights across the country through its hubs in Phoenix and Las Vegas.

America West operates in Houston out of George Bush Intercontinental Airport. In March 2005, The airline served nearly 42,000 passengers at Bush, according to Houston Airport System figures. US Airways, also operating out of Bush, served a little more than 37,000 in March, according to the same numbers.

When Parker took over as America West chief executive in 2001, the airline was dogged by a reputation as a carrier that delayed flights, lost luggage and left customers waiting.

The company was pushed to the brink of bankruptcy shortly after the Sept. 11, 2004 terrorist attacks and secured a $429 million loan guarantee from the federal government. Parker has said the guarantee allowed America West to avoid Chapter 11 bankruptcy, a move the airline might not have survived.

Its service record has since improved. In July 2003, the company reported its first of several quarters of profits after more than two years of losses. Its earnings have since have been mixed, due largely to high fuel costs and too many cheap fares in the market.

[guitfiddlist]

Why are you on FreeRepublic? Don't believe in supply and demand?

And as long as we're talking about "supply and demand" and "free markets", I don't want another DIME of my taxpayer money going to bail them out. I'm sure as a free market purist - you would heartily agree, EH??

[guitfiddlist]

It just so happens that US Airways runs 70% + load factors out of Charlotte,

That tells me nothing. How much of that traffic originates out of Charlotte? In any case, many Charlotteans find the drive to Greensboro too long - and will use USAir out of Douglas, but there is a widespread resentment of USAir in Charlotte, and their free market principles exercised means that they will fly other airlines any chance they get. Again, as a capitalist - I certainly understand freedom of rates - but you fail to understand that consumers have choices too - and don't want lousy airlines subsidized. You need to understand both sides of capitalism, friend.

So, Mr. Free Market Purist, care to join me in advocating against any government bailouts of USAir? Can we agree on that?

[safisoft]

So, Mr. Free Market Purist, care to join me in advocating against any government bailouts of USAir? Can we agree on that?

You sucked too much Koolaid. There is not government bailout of US Airways, and this merger will certainly not invite one in the future.

[saminfl]

US (sc)AIR was originally a conglomeration of bad or failing Airlines. Most noteably Eastern Airlines.

I don't remember Eastern becoming part of USAIR. I thought the lousy Machinists union put Eastern out of business.

[hoagy62]

US AIR is actually an acronym:

Unfortunately, Still Allegheny In Reality

[snowman1]

I might have a better feel for these two if they flew American planes rather than that EU junk.

[getmeouttaPalmBeachCounty_FL]

About 2200 pilots from TWA entered American's seniority list. I believe that about a thousand of them were captains who were integrated into the AA system, which basically screwed all the AA FOs and FEs. About 1200 of the TWA pilots were FOs, and yes, they are furloughed.

What will most likely happen if USA merges with America West is another rotten deal for a group of pilots trying to save another's butt. Remember, USA is bankrupt, and America West is not. USAir needs America West, yet the pilots at AW, a company that is not in bankruptcy, will get the raw side of the deal. Especially due to the fact that their union is the same, so the merger details are already clearly written. AW pilots will lose seniority. Their captains must be hating life tonight.

I feel their pain.

[Central Scrutiniser]

Well, as a retired employee of America West, I'm not really happy, USAirways is a typhoid mary, a crappy airline that destroyed 3 good airlines by merger (Empire, PSA, Piedmont)

Thankfully, the majority of USAirways management are going to be canned, and Doug Parker will run the new airline.

A new name should be created, as USAirways=crappy, incompetent, and loser. I flew on AWA today, my Flight Attendant was very nice and very very junior, she was optimistic, I didn't have the heart to tell her that she has a very small chance of keeping her job, but the Flight Attendants voted in their union, so tough noogies.

On the other hand, my flight bennies should be nice with Honolulu, London, Frankfurt and Paris added to free destinations for me.

[Central Scrutiniser]

US (sc)AIR was originally a conglomeration of bad or failing Airlines. Most noteably Eastern Airlines.

Wrong, Eastern was owned by the company that owned Continental, the original Frontier, Texas International, and New York Air. USAirways is made up of PSA, Empire, and Piedmont, and was originally called Allegheny Airlines.

[Central Scrutiniser]

AirCal was great, they got absorbed into American Airlines, just as my beloved TWA was, and the tiny but good RenoAir.

Not a big fan of AA, the TWA folks got screwed, but Carl Icahn condemned them to death with the Karabu agreement and the undercutting ticket scam.

Its a great industry to be involved in, lots of great people and lots of complete scumbags.

[Arkie2]

I don't know how many pilots from TWA are still on the seniority list at AA but I can tell you I am flying with a lot of ex TWA/AA pilots who hate what happened during the merger. The AA F/O's and F/E's weren't the only guys who got screwed. I think we can both agree that mergers suck. There are a lot of losers and not too many winners.

[Central Scrutiniser]

He is right about "Because they could" US owns Charlotte, and charges confiscatory prices there, as they did in BWI and PHL before Southwest came and knocked them around. We have it great in Phoenix, Southwest and America West keep fares here very low, and both airlines turned a profit last quarter.

[Central Scrutiniser]

What will most likely happen if USA merges with America West is another rotten deal for a group of pilots trying to save another's butt. Remember, USA is bankrupt, and America West is not. USAir needs America West, yet the pilots at AW, a company that is not in bankruptcy, will get the raw side of the deal. Especially due to the fact that their union is the same, so the merger details are already clearly written. AW pilots will lose seniority. Their captains must be hating life tonight.

I was at America West in the non union days, we would tell the pilots and flight attendants about what their life would be like in a union during a merger, how they would be stapled to the bottom of the list, because the union cares more about the bigger carrier. I understand why the pilots voted union, they need a pension, but the flight attendants did everything based on their heart not their head. And, because airlines are classified under the obsolete by 40 years Railway Labor Act, they can't decertify and go non union, they can only replace one union with another. But, we tried to tell them...

[Central Scrutiniser]

America West runs about 80-85% load factors out of Phoenix, load factors mean nothing. If you fill the plane, yet lose money on every seat, you are not doing a good job.

The trick is to have a much higher yield, CASM (cost per average seat mile) needs to be much less than RASM (revenue per average seat mile). US always had high RASM, but much higher CASM, AWA has low CASM, but pretty low RASM.

If they can figure out the mix, they will do well. However, some entire plane types have to go away. US will have to abandon its 737 400's and 300's, the terrible A321, its 767's and its new Embraer aircraft. America West will have to ditch its 737's. The new airline will be A330's for long haul Europe flights, 757's for trans continental flights, A320 and A319 for medium haul flights, and Mesa Airline's CRJ50 and CRJ90 for regional flights. In the future, the A350 will provide lift for S. America and/or Asia.

[hoagy62]

When I went on the tour of the Boeing plant in Everett, WA, the tour guide ended with the following:

"Just remember the next time you get ready to fly; be sure to tell your travel agent 'If it ain't Boeing, I ain't going!'"

[guitfiddlist]

You sucked too much Koolaid. There is not government bailout of US Airways

The government provided $900 million in guarantees to get USAIR out of bankruptcy the first time around. Now the taxpayer will be bailing out USAIR in an ongoing and continuous fashion by paying out $3 BILLION in USAir pension obligations. If that isn't a bailout - I don't know what is. Your personal insults are convincing nobody on this board.

[safisoft]

The government provided $900 million in guarantees to get USAIR out of bankruptcy the first time around. Now the taxpayer will be bailing out USAIR in an ongoing and continuous fashion by paying out $3 BILLION in USAir pension obligations. If that isn't a bailout - I don't know what is. Your personal insults are convincing nobody on this board.

Loans that are repaid are not bailouts. As for pensions, you are misinformed. The pensions are gone, and what the PBGC will pay out is only WHAT THEY ALREADY HAVE TAKEN from us. Believe me, I am very well informed on this one - it was my money - they cut off the pensions except for pennies on the dollar, meanwhile immediately put 1.5 billion of our money in their banks.

The government, to-date is out nothing. On the other hand, US Airways were to liquidate, the it would default on the $575 million still due on the $975 million borrowed 2 years ago - although with them at the front of the creditor line, they would likely get all of theirs. Bottom line: no bailout.

As for why the ATSB was setup: plain and simple: the government, with their assine lack of security put us in the position were were in. Our airline had its one of its principle cities closed for over a month (DCA). We are the number one carrier in DCA. But, a LOAN is just a LOAN. Next time you pay your mortgage, just write in the memo: "thanks for the bailout".

[safisoft]

He is right about "Because they could" US owns Charlotte, and charges confiscatory prices there

Of course he is right. I was only thinking how silly such a statement from someone who is on FreeRepublic to make. Free market is free market. It ain't for charity. As for "confiscatory" - maybe you should look that up in a dictionary, LOL. I know it is a common word for charging a market rate, but such vocabulary should not be used by people not in the liberal mindset.

[safisoft]

If they can figure out the mix, they will do well. However, some entire plane types have to go away...737 400's and 300's...A321, its 767's and its new Embraer aircraft... The new airline will be A330's for long haul Europe flights, 757's for trans continental flights...

Not sure where you get your info. The details are still new, but the aircraft going away are:

10 A319
36 737-300

These were already announced at US Airways. The A321 is staying. The EMB170 is likely staying since Eastshore is one of the investors and whether they operate them or not, regardless they will still plan to fly them, under the Express livery. Mesa, at least for now, is loosing some leverage since they did not pony up. The additional 25 aircraft that are going were not announced by type, but those are not enough to get rid of any single type except the 767, and those can't go until 2009. My guess is that the aircaft that will go (61 of them total) will be the A319s aleady leaving US Airways (to be offset by 13 deliveries) and the B737-300s. That's it until the time when the A350s would be taken for delivery - then maybe the 767 goes. Until then, if we got rid of 767s we would be cutting off one of our main revenue streams: International. We fly about 50 transatlantic flights a day.

GE Capital is a major player in this. They want some of their aircraft back to put in overseas markets where the lease rates are better - but since AWA and US Airways are the two most heavily financed by GE, will not get rid of the majority of those leases. Those are mainly 737. Airbus is another major financer - current, and going forward. The Airbus/Boeing mix will remain.

[safisoft]

What will most likely happen if USA merges with America West is another rotten deal for a group of pilots trying to save another's butt... Especially due to the fact that their union is the same, so the merger details are already clearly written. AW pilots will lose seniority.

One significant reason that AWA is ALPA is to get a merger policy that protects current position. American screwed TWA people because they did not ALPA merger policy. American has a different union. I was Piedmont, and if your scenario had been played, I would not have lost much relative seniority at all. The fact is, ALPA policy starts with date-of-hire, but must take into account relative position and maintain Captain's seats at the respective airline. Unlike Central Scrutiniser's scenario in which AWA would have been better off being NON-ALPA, not true. Having the same union will make it much more likely to preserve relative seniority. "Equipment fences" are what ALPA likes to use to protect position.

This merger is actually the truest 'merger' of any significance in airline history in the US. No one is buying anyone. That is a first. When the merger is complelted in the Fall, US Airways Group holding company will own AWA in a new division. The two will divisions will be identically branded (i.e. US Airways on the side), but operated separately for 2 to 3 years. Headquarters moved to Tempe, but the executive suites will be a mix of both airlines, and the BOD will be pretty evenly split. The only stock bought/sold will be a reissue of AWA stock by the new entity. So... who is the buyer?

The biggest plus of all... Doug Parker will run it. One thing that has pulled USAir down for 15 years has been poor middle-management, and transient upper management. There has been a culture war at USAir since it bought Piedmont, and the spoils system in middle management has been a very bad thing for running an airline. Doug Parker will not permit it.