US Airways and America West Airlines agreed yesterday to a merger that would form the nation's sixth-largest airline, the first union of two major carriers since the 2001 terrorist attacks sparked an industry crisis that endures today.
If completed, the proposed deal would join the airlines' parent companies, US Airways Group Inc. and America West Holdings Corp., and help bring US Airways out of Chapter 11 bankruptcy protection, where it has been operating since September.
The new airline would keep the US Airways name, but US Airways' headquarters in Arlington, Va., would be consolidated at America West's home offices in Tempe, Ariz. America West chief executive W. Douglas Parker would be chairman and CEO of the carrier. US Airways chief executive Bruce Lakefield would be vice chairman.
US Airways and America West disclosed last month that they were in merger talks, so the deal was not unexpected. The airlines said their goal was to create a lower-cost, full-service national airline that can offer discount fares and still turn a profit.
The merger agreement was reached after the companies secured $1.5 billion in additional financing from, among other sources, private institutional investors and the airlines' suppliers, including airplane maker Airbus SAS.
US Airways now is the nation's seventh-largest airline in terms of passenger traffic, with routes concentrated in the Northeast and along the Eastern Seaboard. Its hubs include Charlotte, N.C.; Pittsburgh; Philadelphia; and Washington. The airline employs 30,100 people.
The routes of eighth-ranked America West consist of mostly east-west flights between its hubs in Phoenix and Las Vegas. It has 14,000 employees. Founded in 1983, America West has been through a bankruptcy reorganization.
"Both airlines suffer in that neither of us have truly national scale," Parker said at a news conference. The merger would solve that problem and provide a "consumer-friendly pricing structure across the United States on one airline," he said.
If nothing else, US Airways' fares generally should move down closer to those of America West, which already considers itself a discount airline, said Terry Trippler, chief executive of FareFacts.com, a travel Web site. "Air travelers all win" with the merger, he said.
But some analysts suggested that fares in some markets could rise.
"There's less competition whenever there's one less carrier, so they might be able to inch up fares, especially in markets where they dominate," said Matthew Bennett, who runs FirstClassFlyer.com, a travel-related Web site.
Pruning service
Executives said the combined airline would prune service on unprofitable routes, which weren't immediately identified.
Even if the combined carrier flies with lower costs and a stronger balance sheet, analysts said, it still must compete with Southwest Airlines Co. and JetBlue Airways Corp., which have remained profitable. In particular, Southwest has invaded important US Airways destinations in the East in recent years, sparking fare wars the struggling airline could ill afford.
Both carriers said they hope to complete their merger this fall, but first the deal must clear several hurdles. It's subject to approval by US Airways' bankruptcy court judge, America West's stockholders and the Air Transportation Stabilization Board.
The ATSB, founded after the Sept. 11, 2001, terrorist attacks to help the battered airlines secure new financing, guaranteed loans for US Airways and America West that currently total about $1 billion.
The merger isn't likely to have a heavy impact on service at any of the three Baltimore-Washington area airports because America West offers so few flights.
At Baltimore-Washington International, US Airways was once the dominant carrier but now offers 42 daily flights, making it the sixth-largest carrier there. America West offers five daily flights at BWI.
"There should be no significant change at BWI," airport spokesman Jonathan Dean said. "The two airlines and their service actually complement each other at BWI. Also, if the merger occurs and it leads to a stronger airline, that's a positive."
At Washington Dulles International Airport, US Airways offers 17 daily flights and America West offers three. At Ronald Reagan Washington National Airport, US Airways offers 186 and is the dominant carrier, and America West offers four.
Melding the two work forces "will take some time," and the "seniority integration, we know, will be a challenge," Parker said.
New shares
The airlines' new equity investors - who are scheduled to provide a $350 million cash infusion - would own 41 percent of the new airline. America West would own 45 percent and US Airways would own 14 percent, the companies said.
The new carrier would issue new stock to the public, and current America West stockholders would receive an as-yet unspecified number of shares in exchange for their existing stock.
The Los Angeles Times is a Tribune Publishing newspaper. Sun staff writer Meredith Cohn contributed to this article.
