Report Says Carriers Identified Over $1.5 Billion In
Savings
United Airlines parent company UAL
Corp. could be days away from announcing a merger with US Airways,
according to the ever-popular unnamed sources.
The Wall Street Journal reports talks continue between the two
airlines, people close to the matter say, even as the number two
airline attempts to lure Continental Airlines away from its
plan to remain independent, and join with United instead.
As ANN reported, Continental
spurned United's advances April 27, opting to chart its own course
instead of taking on the challenge of dealing
with United's woes, including a staggering $537 million loss
in the first quarter of 2008.
Sources say low-level talks between those two airlines are still
underway... but many believe Continental will instead opt to form
alliances with American Airlines and British Airways -- a
partnership carrying many of the benefits of a full-on merger, but
with none of the inevitable hassles.
As for a merger between United and US Airways, the question
comes down to the benefits of saving money, versus potential
regulatory hassles and all-but-guaranteed labor strife. The two
sides reportedly identified over $1.5 billion in potential cost
savings should the airlines join forces, according to the WSJ.
That number could be large enough to overshadow concerns about
merging the two airlines' volatile labor forces, and ungainly route
networks... particularly as both United CEO Glenn Tilton and US
Airways chief Doug Parker are fierce proponents of industry
consolidation, spurred on by the proposed combination of Delta Air
Lines and Northwest Airlines to form what would be the world's
largest airline.
The thinking is that larger carriers will be better able to
survive an increasingly-competitive global market, record high oil
prices, and a slumping US economy. But that plan is a tough sell
for many, including pilots at United... who last week warned management
against taking on the "toxic stew" of US Airways' pilot integration
issues, stemming from that airline's 2005 merger with America
West.
There's also the question of whether federal regulators would
approve a United/US Airways merger. UAL tried once before to buy US
Airways, in 2000; that effort was soundly rejected by the
Department of Justice over anti-trust concerns, even after both
sides set up a series of Rube Goldbergian assets selloffs to
appease them. United's pilots and mechanics vehemently opposed that
joining, as well... leading to crippling labor actions and
operational snafus.
A United/US Airways merger could be announced within 10 days,
according to sources. Brace yourselves... it could get bumpy.
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