Tue, Apr 13, 2010
A Deal Would Vault The Combined Airline To #2
Merger talks between US Airways and United Airlines appear to
be serious, according to one source close to the negotiations, but
details of any possible agreement are being closely held.
The same source said that the deal is just as likely to fall
through as it is to move forward.
If it does go ahead, United would acquire US Airways in an
all-stock transaction, and the it would also be the entity to
survive. The two airlines have been in negotiations off and on
since 2008, according to a report in The Wall Street Journal. Both
airlines have cut routes and regained some of their liquidity since
the talks broke down about two years ago. Analysts expect both
airlines to return to profitability later this year.
A deal, if any, would likely be announced in two to three weeks.
However, labor issues and the fact that both airlines have a strong
presence in the Washington, DC market could be potential sticking
points. US Airways pilots, for example, have a clause in their
contract that calls for their wages to return to pre-bankruptcy
(read, 'higher') levels should there be a merger that results in a
change in leadership at the airline. Neither flight attendants nor
pilots have had a successful contract negotiation since the current
makeup of US Airways was born from a merger with America West in
2005.
United Airlines' Pilots Union chief Capt. Wendy Morse said in a
statement that "United pilots certainly wouldn't benefit from being
drawn into that situation." Ms. Morse, who also serves on UAL's
board of directors, went on to say a merger with US Airways is
"unlikely to achieve significant synergies."
Some analysts say that the merger talks are something of a
stalking horse designed to re-open negotiations between United and
Continental Airlines, which broke down in 2008. Continental would
become the #4 airline, should the merger deal between United and US
Airways be finalized. Officials from all three airlines were
unavailable for comment.
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