If the America West/US Airways merger works, it’s going to work very well indeed. If it doesn’t, the fall will be nothing short of fatal. Such is the assessment of David Stempler, president of the Air Travelers Association. “This is either going to be a big, big success for [America West CEO] Doug Parker, or it’s going to take both carriers down,” Stempler asserts. He believes there is no middle ground, no muddling through. If it goes through, this would be a merger of opposites. America West is breezy and agile. Its fleet is painted in the bright hues of the western desert. US Airways, still in Chapter 11, is traditional and serious. Its Navy blue airplanes stand out starkly at urban airports along the East Coast. HP has been flying high of late; US just hanging on. America West’s labor relations are harmonious. US Airways’ have been acrimonious. It is against this backdrop that federal bankruptcy court must weigh the benefits of a merger to creditors; the Federal Trade Commission; and both the Departments of Justice and Transportation to competition and consumers. Betting some $1.5 billion that all the pieces will fall into place is an aggregation backers that include Airbus, Air Canada’s parent company, ACE; credit card issuers; and hedge funds. The idea is that America West will adopt the US Airways name, that in the process, it will re-fashion the Chapter 11 carrier into a low-fare, full-service carrier like itself. “Let’s be clear,” aviation consultant Mike Boyd, president of the Colorado-based Boyd Group, says, “this is more of an asset buy. America West is basically buying the assets of US Airways.” For the bankruptcy court to give the go-ahead for the deal, merger proponents are going to have to convince the judge that the America West takeover leaves US Airways creditors in at least as strong a position as they would be should US Airways liquidate. That’s one challenge. THE SOUTHWEST FACTOR Another is fending off potential bids by carriers such as Southwest and American for US Airways’ assets. Southwest “might want more [US Airways] gates at Philadelphia,” Stempler says. And American has always been interested in US Airways’ northeast shuttle. Loss of either could “make the whole deal untenable,” he says. And then there’s Charlotte. Seemingly, Southwest has pursued US Airways all over the map. First, it was the West Coast. Then, Baltimore/Washington. Lately, it’s Philadelphia and Pittsburgh. While Boyd believes there’s no conscious plan to pressure US Airways per se, the result of Southwest’s expansion into its territory has resulted in Charlotte becoming US Airways’ last bastion of unbridled strength. “The linchpin of this deal, the most vulnerable point, is Charlotte,” Boyd says. Should Southwest or another low-fare carrier decide to invade CLT in a major way (AirTran recently moved in with a small slate of flights), that would render it “exceedingly difficult for the merged entity to survive,” Boyd says. MIND THE GAP If the merger goes through, plans are to pare a significant number of airplanes from the combined fleet, reducing it to 361 aircraft. Deploying those airplanes will be critical. America West is a significant player out of its Phoenix and Las Vegas hubs, having successfully competed against Southwest at each. US Airways dominates Charlotte, and is big at Boston, Washington National, Philadelphia, and (still) Pittsburgh. It’s that fly-over country in-between that’s worrisome. While each airline serves the Midwest, neither does so significantly. “Tying the two route systems together is going to be critical,” Boyd says. “There’s a huge DMZ between Phoenix and Pittsburgh.”
To be successful, the new US Airways would probably have to dump some of its historic north/south routes east of the Appalachians, and connect more of mid America. But no wholesale shedding of cities is planned. Doug Parker says the good news is that the combined carrier would continue to serve, in one fashion or another, all cities currently being served by either.
From the frequent flyer’s perspective this could be a very good deal—at least in the near term. America West flyers will be able to connect over US Airways’ transatlantic gateway at Philly to a host of European cities. They’ll also, quite possibly, be able to take advantage of US Airways’ membership in the globe girdling Star Alliance. Finally, there’s the issue of fares. America West essentially transformed itself a few years back, becoming a regionally formidable low-fare, full-service airline. If it can turn US Airways into the same kind of competitor, and do it on a national scale, frequent flyers will be the clear winners. If not...
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