Posted on 05/19/2005 5:05:24 PM PDT by 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.
To-date...
The difference between what assets USAir passes off to the government - and the money to pay the pensions owed to USAir retirees is to be paid by taxpayers. This is a free market intervention.
"A loan is a loan." A government guarantee of a loan to a company is a free market intervention. Without it, USAir would likely never have gotten the financing to emerge from bankruptcy and would have been liquidated. The government propped it up by guaranteeing the loan, something I never got for my mortgage. This was a free market intervention.
Live by free markets, die by free markets.
American did nothing of the sort. American saved TWA. Immediately, pilots at TWA saw a huge increase in pay, they were picked up off the street, where otherwise, they would have been stapled to the bottom of company going through interviews and a new hire process. They were given AA's medical insurance, and were provided with a great outlook for the future at a profitable airline. They were able to have an opportunity to fly more a/c types at AA than had TWA miraculously saved itself after, was it three, bankruptcies?
The only people I've ever seen to profit by mergers and deals are the suits in the boardroom who somehow have better pension "protection" than its pilots, flight attendants, etc. Don Carty can screw up an airline, get booted out of his job, and leave the company with his silly, googley grin and millions of "protected" dollars, as month after month, AA workers suffer cutbacks, and furloughs. Lovely.
The 321 is a dog, they won't be in Phoenix, they don't have the range to do transcons in hot weather. The EMB is a good plane, provided you let a seperate commuter fly them, they really need to simplify with the minimum of plane types.
As for the 67, you are right, you are wedded to them for a while, but I'd rather see the 330 replace all the 67 flying, some of your 67's are pretty long in the tooth if I remember correctly, as are all of our 757's.
As for Doug Parker, he is a great guy, I was only there when he was the CEO for about 6 months, but he really is a breath of fresh air after we were subjected to the evil Bill Franke, and our pie in the sky founders who damn near killed us all with their crazy schemes. Its easier when both sides have a union, but even our most senior guys are fairly junior to the US and PSA and Piedmont folk, but there is a big retirement bulge coming up soon.
I do not want to see another TWA scenario, that was awful. I hope the majority of my friends at AWA's HQ keep their jobs, its a great place. I visited Crystal City once a few years back, and it was not a happy place.
Remember when USeless Airways was Allegheny or Agony Airlines?
I used to fly 5-7 times per week in a former job and had to take Agony almost half the time.
Quit that job when my kids started calling me Uncle Dad.
We still have an old Eastern bird in our 757 fleet, but they are all RR engines. We are in the process (again) of ETOPS for the 757 for Hawaii service starting early next year, I just wish we would fly the 757 to Costa Rica, the 319 has serious performance issues coming out of there on a windy day.
I'm listening to the employee webcast that Doug gave last night, interesting, he is a good guy, and if anyone can do it, he can.
I don't see any Boeing airplanes in this fleet in 5 years.
Its not just a matter of cost, its a matter of "corporate culture" and worker productivity at Southwest vis a vis the legacy carriers.
Doug did say on the webcast that the 330 will take over all the transatlantic, and that if the 350 doesn't meet the promised specs, we will look at 787 instead as the follow-on for the 330.
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