Unlike past mergers, this deal would keep the structures of both airlines essentially intact. The airlines said in a joint statement that they would coordinate their schedules and eventually merge their frequent flier programs, and that members of their plans would retain their miles. Once the deal is concluded, which the companies said could be this fall, America West's red, white and green planes would be painted in US Airways' colors of dark blue, white and red.A combined airline would be in "a position of strength and future growth that neither of us could have achieved on our own," said W. Douglas Parker, the chief executive at America West, who will run the combined airline as chief and chairman.Bruce Lakefield, the chief executive at US Airways, will become vice chairman of the combined airline. In the statement, Mr. Lakefield said that the merger would "bring more choices for customers."The two airlines, which held their first discussions of a merger about a year ago, have been in serious talks since last month.
They announced the merger after a meeting by America West's board in Phoenix yesterday. The board of US Airways approved the arrangement on Wednesday.This is the first major deal in the domestic airline industry since American Airlines bought the assets of Trans World Airways in 2001. That deal made American the industry's biggest carrier.Five years ago, US Airways agreed to be acquired by United Airlines, but the deal was dropped in 2001 after the Justice Department moved to challenge it in court on antitrust grounds.The deal between America West and US Airways would be backed by $350 million in new equity from a quartet of investors.They include ACE Aviation Holdings, the parent of Air Canada, which is investing $75 million; PAR Investment Partners, a Boston investment group, which is investing $100 million; and Peninsula Investment Partners, a Virginia firm, which is investing $50 million. Air Wisconsin, which previously announced a $125 million investment in US Airways, will also participate.
America West and US Airways said they may also seek to raise an additional $150 million in new stock.The deal includes a $250 million loan from Airbus, the European aircraft manufacturer. In return, the combined airline would become the first customer for the new Airbus A350 medium-range plane, with the first arriving in 2011.The companies said the Retirement Systems of Alabama, which has been the major investor in US Airways, could invest in the new airline. But David G. Bronner, the chief executive of the pension fund and the current chairman of US Airways, has not been given a seat on the two companies' new 13-member board.Yesterday, Mr. Parker said during a conference call with reporters that there would be some job reductions after the merger is completed, but that the two airlines did not expect "major furloughs."Obstacles to the US Airways-America West transaction remain, however.The deal requires approval by a federal loan board, which granted loan guarantees to both airlines after the Sept. 11 terrorist attacks.
Together, US Airways and America West owe more than $1 billion on their federal loans.A spokeswoman for the loan board said it was reviewing the deal and "will continue to work with the airlines to make sure that taxpayers' interests are protected."In an interview, Mr. Parker said the two airlines would eventually repay all of their outstanding loans backed by the federal government.The deal also requires approval by a federal bankruptcy court in Alexandria, Va. US Airways, which is based in Arlington, Va., has been operating under bankruptcy protection since last September, its second Chapter 11 bankruptcy in three years. Given that, the deal could generate other offers for the assets of US Airways, which include its East Coast shuttle operating from New York to Boston and Washington. If the deal goes through, however, it would lead to a new national airline, boasting low costs and promising low fares. The new company would have primary hubs in Phoenix, Philadelphia and Charlotte, N.C., and secondary hubs in Las Vegas and Pittsburgh.For the last few years, industry executives, including Mr. Parker, have contended that the industry was sorely in need of consolidation so that it could eliminate excess seats.
The deal could prompt other airlines to examine whether they need to combine.But the deal, in reality, would do little to reduce service, except to remove one name from airport concourses, industry analysts said. One big fear is labor unhappiness.Though they have the same unions representing pilots and flight attendants, each airline has a different union for mechanics -- the International Brotherhood of Teamsters at America West, and the International Association of Machinists and Aerospace Workers at US Airways.That could lead to immediate disputes over seniority and assignments. The airlines said yesterday that this would be sorted out over time. The Air Line Pilots Association said it would scrutinize the deal and make sure its members were protected."We're anxious to become a partner in what could become the country's premier low-cost carrier," said Jack Stephan, a spokesman for the pilots' union at US Airways.But industry executives said the financial problems at both airlines in recent years hurt the deal's chances.
Earlier this month, a senior vice president at Delta Air Lines, James Whitehurst, likened the pair to sinking ocean liners. When tied together, Mr. Whitehurst said, "the combined ship sinks faster." But other industry specialists said Mr. Parker, who has run America West since shortly before the September 2001 attacks, would be determined to make the deal succeed."He's not a guy who's sitting around waiting for the world to pass him by," said Michael Allen, chief operating officer at Back Aviation Solutions, an industry consulting firm. Mr. Parker believes America West "does not need to be only a left-coast player," Mr. Allen said.America West, which began flying in 1983, was one of the first airlines founded after the industry was deregulated by President Jimmy Carter in 1978. It grew steadily throughout the 1980's but filed for bankruptcy protection in 1991, emerging three years later.Late last year, America West investigated a merger with ATA Airways, which is operating under bankruptcy protection.
US Airways, meanwhile, is the descendant of a company formed in 1939 to provide mail service to western Pennsylvania.US Airways filed for Chapter 11 bankruptcy protection in 2002. Though it emerged in 2003, with the help of $900 million in federal loan guarantees, it filed for bankruptcy protection again last September.Snags on United's Pension IssuesCHICAGO, May 19 (AP) -- Unable to negotiate an agreement on a new long-term contract, United Airlines and its machinists' union returned to a bankruptcy courtroom Thursday to resume arguing whether the union's contract should be broken in the absence of a deal.The failure to wrap up a contract agreement left hanging the issue of a possible strike by United workers, who have threatened to walk off their jobs if lower pay and benefits are imposed without a consensual deal.Negotiators for both sides were racing to beat a new unofficial deadline of late Friday morning, when closing arguments in the case are scheduled and a ruling to break the contract could soon follow.