April 19, 2005
Bankrupt US Airways and America West Airlines are in "advanced" merger talks, working to create a nationwide low-cost airline that would rival discount leader Southwest Airlines, the Wall Street Journal reported.
The merger, which is far from complete and faces many obstacles, would form the nation's sixth-largest airline, based on 2004 travel statistics.
With hubs in Phoenix, Las Vegas, Philadelphia and Charlotte, the combined carrier would be able to offer cut-rate fares through a hub-and-spoke system that would give it a very flexible and far-reaching network. Southwest, by contrast, operates a point-to-point system on heavily traveled routes.
Other airlines with nationwide hub-and-spoke systems include United, American and Delta, all "legacy" high-cost carriers. Both US Airways and America West have cut their costs dramatically in recent years and would be able to offer the flexibility of the hub-and-spoke system with the low costs of a Southwest or Jet Blue.
The merger could crack open the airline business. It would offer consumers the price-cutting pressures of fare competition while, through consolidation, eliminating some of the extra capacity that is currently driving down profits for all carriers, analysts said.
US Airways, like its departed predecessor Eastern, offers an extensive route system along the Eastern Seaboard but has very few routes in the West. The merger would marry US Air's stunted network with America West's far-reaching Western routes.
The Journal said that the merger talks have gained momentum in recent days and said that, if successful, the combined airlines would probably fly under the US Airways brand.
The merger faces numerous obstacles. It would have to pass muster with creditors, the Bankruptcy Court, numerous governmental agendies, shareholders and both carriers' unions.
