US Airways and America West need funding from investors to get merged

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Monday May 16, 12:41

US Airways and America West need funding from investors to get merged

(by Brigitta Zulfitzler)

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US Airways and America West need funding from investors to get merged

America West Airlines and US Airways Group Inc. started the talks with Airbus SAS, hedge fund Par Capital Management Inc. and Air Canada’s parent Ace Aviation Holdings Inc. on providing a loan for a merger of the two U.S. carrier.

Airbus is said to be able to provide a $250 million loan for aircraft orders. Ace is reported to contribute $100 million to $150 million in equity. Par Capital and a second hedge fund may provide a combined $125 million in equity.

The fact that US Airways is not able to emerge from bankruptcy without funding and America West is not inclined to invest much of its own capital determined the need of two carriers for outside investing.

US Airways and America West if combined would force out Southwest Airlines Co., the world’s largest low-fare carrier, as the No. 6 U.S. airline.

The sum required for merger is said to be as much as $750 million to enable US Airways to emerge from bankruptcy and America West to avoid its own liquidity problems.

Airbus, the world’s largest aircraft maker, is eager to provide funding in exchange for an order for 20 of its new A350 planes. ACE is inclined to get maintenance services from the combined carrier.

A merger agreement if reached will need approval of U.S. antitrust regulators and the Air Transportation Stabilization Board, which granted a $900 million federal loan guarantee for US Airways and a $380 million guarantee for America West after the Sept. 11, 2001. The agreement must also be approved by the unions and shareholders of both airlines.

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