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Thu, May 19, 2005

Engaged To Be Married: US Airways & America West

Deal To Be Financed With $1.5 Billion In New Money

REAL TIME NEWS 1830 EDT -- Bankrupt US Airways and Arizona-based America West Thursday announced plans to wed, a marriage that would save the Arlington, VA-based airline from bankruptcy and give America West access to coveted East Coast markets.

The deal still has to be approved by regulators and a Northern Virginia bankruptcy court.

It's the first major merger in the airline business since American Airlines gobbled up ailing TWA four years ago and is seen as one of several corporate marriages between carriers still smarting from the 9/11 attacks and a huge jump in the cost of fuel.

The new airline would be America's sixth-largest, with combined assets of approximately $10 billion.

While the new airline will carry the name US Airways, it will be headed by America West chief Doug Parker and will be based in the Phoenix suburb of Tempe, AZ, according to a joint statement.

Air Canada, Wisconsin Air and GE are all partners in the merger, vowing to contribute $1.5 billion in money to capitalize the venture.

But will it work? Parker says it will.

"Building upon two complementary networks with similar fleets, closely-aligned labor contracts and two outstanding teams of people, this merger creates the first nationwide full service low-cost airline," he said in a joint statement released after two days of final negotiations in Tempe.

"That we have secured such an impressive slate of equity investors and partner support in a period of such industry uncertainty is a strong indication of the prospects and enthusiasm for this transaction," US Airways chief Bruce Lakefield said in the statement. "We believe that the airline created from the merger of US Airways and America West will bring more choices for customers, as we expand the low-fare pricing structure of America West to dozens of new cities, while also offering passenger-service amenities, such as an attractive frequent flyer program, assigned seating and a First Class cabin."

But there was no immediate word on the fate of thousands of employees working for both companies.

"Meat on the butcher block," Machinists union leader Bill Wise told ANN shortly before the merger was announced. "That's a good way to put it." Wise said union leaders were told nothing of the merger talks until news of the negotiations reached the media. He said he was shocked to learn that the negotiations had been conducted in secret for 14 months.

Wise, a mechanic based in Charlotte, NC, said he was most concerned about seniority in a blended system. He was also worried about whether heavy maintenance for the new company's combined fleet would be handled by outside contractors rather than airline mechanics.

FMI: www.usairways.com, www.americawest.com

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