clock menu more-arrow no yes

Filed under:

Airline merger faces only a few final hurdles

PHOENIX — As America West Airlines and US Airways approach the final milestones on the path to their planned combination, officials say the two companies could start operating as one by the beginning of October.

To complete the merger, shareholders of America West Holdings Corp., the parent of Tempe, Ariz.-based America West Airlines, will vote Tuesday on whether to approve the company's union with bankrupt US Airways Group Inc. US Airways' unsecured creditors, a key party in the case, have already given a thumbs-up.

Then on Thursday, U.S. Bankruptcy Judge Stephen Mitchell will hold a hearing in Virginia to consider final court approval of the US Airways reorganization plan, the centerpiece of which is its proposed union with America 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.

If both shareholders and the bankruptcy court approve the corporate marriage, customers will begin to see image changes almost immediately, airline officials said. However, flight crews, maintenance and safety procedures for each airline will remain separate for some time.

"All the training manuals, policies, all of that has to be consolidated into one program and approved by the FAA. And that doesn't happen overnight," said US Airways spokesman Dave Castelveter, noting it could take up to two years to fully merge operations.

"It should be seamless to the customer though," he added. "They shouldn't notice whether the airplane is being flown by an America West pilot or a US Airways one."

Soon after America West acquires US Airways, frequent flier miles accumulated at one airline will apply to the other carrier, America West spokesman Carlo Bertolini said.

Even though America West is the acquiring airline, the US Airways name will survive and be used when the nation's seventh- and eighth-largest carriers combine to create the No. 6 airline in terms of passenger miles, an industry measure. The deal will be funded by $1.5 billion in new capital from a variety of investors, including aircraft maker Airbus.

Anticipating full approval, a new board has been named for the new US Airways. Of the 13 members, six come from America West's board, four are from US Airways' current board and the other three directors represent major investors in the merger.

The combined airline's headquarters will be in Tempe, and America West CEO Doug Parker will be chief executive .

The new combined airline is expected to start reaping financial benefits from the merger fairly soon, especially once overhead cost cutting begins, said airline analyst Ray Neidl of Calyon Securities.

"It's all going through on schedule," Neidl said. "The big question is can they make it work post-merger."

The transition could be turbulent for employees as the new company looks to cut overhead, said Neidl.

Though the combined airline plans to cut 51 jets from its fleet, line jobs such as baggage handlers and flight attendants were expected to stay at similar levels, Neidl said. He said redundant staff and management jobs will likely be the first on the chopping block.

"There will be a little bit of shrinking, but we hope to accomplish a lot of that through attrition," Bertolini said. "That's still an ongoing process."

America West pilots are especially concerned about the merger since they are significantly junior in seniority to US Airways pilots.

The airlines have left it to the unions to work out the seniority kinks.

The America West Air Line Pilots Association declined to comment on what progress, if any, the union had made toward ensuring their pilots' job security.