US Airways, America West in advanced merger talks

MONTGOMERY, Ala. — US Airways Group Inc. and America West are in advanced discussions to merge, creating a national low-cost airline that would better compete with discount rivals and complement each other geographically, US Airways’ chairman said.

Bankrupt US Airways has discussed a merger with several rival carriers, but negotiations with America West have progressed the furthest, Chairman David Bronner said in an interview with the Associated Press late Tuesday.

Talks “probably started in earnest a few months ago,” but no deal is imminent, said Bronner, who also serves as CEO of the Retirement Systems of Alabama, which invested $240 million in the company.

The merger talks between US Airways and America West could herald the start of consolidation for U.S. airlines, although Bronner conceded that such a combination faces numerous hurdles.

“A lot of things will happen in the U.S. airline industry in the next 12 to 18 months,” Bronner said. “We’ll do whatever is necessary to survive; we’ll examine a number of different alternatives.”

A combined US Airways-America West would be better able to compete with discount rivals and complement each other geographically, Bronner said.

Bankrupt US Airways Group Inc. is planning to emerge from court protection later this year, but its reorganization has been complicated by high fuel prices that have decimated the industry’s already-battered finances. As a result, US Airways has approached several rivals about a combination, but the discussions with America West have moved along the most, Bronner said.

A spokesman for America West Holdings Corp., America West’s parent, declined to discuss what he called a “market rumor.”

America West shares fell 44 cents, or 9.2 percent, to $4.37 in morning trading Wednesday on the New York Stock Exchange.

US Airways, based in Arlington, Va., has been in Chapter 11 bankruptcy protection since September 2004. It was the second such filing in two years for the nation’s seventh-largest carrier.

America West was a good potential merger partner because of its West Coast focus and low-cost carrier status — factors Bronner noted also could give any merger proposal a better chance of navigating federal antitrust review.

“If we picked a different airline that we compete with on a daily basis … that would be a much harder sell” (to regulators), Bronner said.

Any merger would be subject to the approval not only of the companies’ boards, but also US Airways creditors, regulators, and the U.S. Bankruptcy Court, which also would review any other proposals “that happen to show up,” Bronner said.

Brookly McLaughlin, a spokeswoman for the federal Air Transportation Stabilization Board, declined to comment Wednesday on the merger talks.

The ATSB, which has made loans to both US Airways and America West as part of the government’s aid package to the airline industry after the 9-11 attacks, would have authority to approve or reject any merger under the terms of its loan agreement with America West.