Gene J. Puskar  /  AP
US Airways and America West will join forces.
updated 5/20/2005 11:10:25 AM ET 2005-05-20T15:10:25

US Airways and America West, two struggling airlines that serve opposite sides of the country, are billing their proposed merger as a buffer against the new era of low-cost rivals, high fuel costs and a flood of cheap fares.

If the combination gets government, shareholder and labor approvals, the new company would become the nation’s No. 6 airline in terms of passenger miles, an industry measure.

It will fly under the US Airways name, which enjoys far better recognition among East Coast business travelers, the companies said Thursday.

The combined company has attracted $1.5 billion in new capital from several investors, including a $250 million loan from Airbus. The European aircraft maker has long been a supplier to both airlines.

US Airways Group Inc. has a strong presence on the East Coast and in the Caribbean, while America West Holdings Corp. operates across the West. The goal is to form a stronger airline that would compete better with lower-cost rivals such as Southwest Airlines Inc. and JetBlue Airways Corp.

“These two airlines are so much stronger together,” said Doug Parker, America West Holdings’ president and CEO. He will serve as chief executive of the combined company.

The merged airline will be based in Tempe, America West’s home. The airlines plan to merge their frequent flier programs, with current members retaining their full mileage balances.

US Airways President and CEO Bruce Lakefield said the merger will ensure US Airways’ long-term viability and the security of its employees.

Parker said he was not sure how many jobs would be cut if the merger goes through. US Airways employs about 30,000, including 600 at its headquarters in Arlington, Va. America West employs about 14,000.

“I don’t anticipate any major furloughs over and above” those that have already been occurring, Parker said.

JR Baker, head of the America West unit of the Air Line Pilots Association, said the group will keep an open mind as it examines the deal but is prepared to defend its members.

Parker said he hopes to obtain regulatory and shareholder approval for the deal this fall, and that customers would see a rapid integration a few months after that. A complete integration of the two airlines, including a combined maintenance and certification schedule, would likely take two to three years, according to Parker.

The merger with America West is designed to provide the final investment necessary to allow US Airways to emerge from bankruptcy. The deal must be approved by the U.S. Bankruptcy Court in Alexandria, Va., where the merger proposal will be subject to competing bids.

Parker said that he does not expect any bidding war to emerge in bankruptcy court.

Under terms of the deal, America West shareholders will get a 45 percent stake in the company, the new investors will have a combined 41 percent and US Airways will have 14 percent.

The two companies owe a combined $1 billion to the federal Air Transportation Stabilization Board, which provided government-backed loans to airlines in the aftermath of the industry crisis precipitated by the 2001 terror attacks.

Parker said negotiations with the ATSB are ongoing, but that “the government risk is dramatically reduced because the new airline is so much stronger.”

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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