Matt York  /  AP file
US Airways was acquired by America West Holdings Corp. in September as part of its strategy to emerge from more than two years of Chapter 11 bankruptcy protection.
updated 11/23/2005 12:29:01 PM ET 2005-11-23T17:29:01

US Airways Group Inc. said its acquisition by America West — the cornerstone of its bankruptcy exit — will face “significant challenges” and the combined company may not perform as expected.

While the acquisition will result in certain synergies and growth opportunities in the future, the company said its significant operating losses have not subsided and will likely continue into 2006.

US Airways was acquired by America West Holdings Corp. in September as part of its strategy to emerge from more than two years of Chapter 11 bankruptcy protection. The combined company retained the US Airways name.

US Airways had estimated that the combined company would see about $600 million in operating cost savings and revenue synergies. However, in a Securities and Exchange Commission filing, US Airways said Tuesday it “cannot assure” the synergies will be realized.

“We may not perform as well financially as we expect following the merger,” the company cautioned.

The integration of the two air carriers “will be costly, complex and time consuming,” US Airways said, and management “will have to devote substantial effort to such integration that could otherwise be spent on operational matters or other strategic opportunities.”

In a separate filing, US Airways said America West Holdings issued warrants to purchase 386,925 common shares at a price of $7.27 per share. The warrants — a substantial discount to the company’s Monday closing stock price of $31.99 — may be exercised any time before Jan. 18, 2012.

The company said it will not receive any of the proceeds from the sale of the warrants.

The new warrants replace those issued in 2002 to the Air Transportation Stabilization Board, an arm of the government, and to AFS Cayman Ltd. In October, US Airways Group agreed with the transportation stabilization board to buy back all of its outstanding warrants for $115.8 million.

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