America West and US Airways intent to merge but cannot so far

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Friday April 22, 07:36

America West and US Airways intent to merge but cannot so far

(by Helen Snow)

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America West and US Airways intent to merge but cannot so far

The talks between America West Holdings Corp. and US Airways Group Inc. about a possible merger which started more than a year ago continue to hang in the air facing some essential obstacles. For America West the main reason has always been the cost issue unsettled by US Airways.

US Airways has cut employees’ pay and benefits by more than $1 billion since filing for Chapter 11 bankruptcy protection in September.

America West, itself, is also in need of an outside investor to contribute in funding a US Airways acquisition. Without a cash injection, America West has no intention to cut a deal being afraid of disbalancing its own financial condition.

The airlines have held talks with Mesa Air Group Inc. and Retirement Systems of Alabama on possible investments, the former US Airways executive said. Both companies became US Airways’ largest creditors after having injected great funds.

Mesa and Retirement Systems both declined to comment on their plans as to the investment.

Yesterday, America West CEO W. Douglas Parker speaking with members of the National Chamber of Commerce stated the need of consolidation to be the key condition for resolving the issues of the airline industry. In his opinion, the fewer number of airlines means the greater chances for the remaining airlines to raise costs.

But some analysts strongly oppose this idea saying that the reduction of the companies can only bring some disbalance in the industry but not resolve the problem.

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