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US Airways, America West Merger May Be Near

May 14, 2005
US Airways and America West hope to announce their merger this week, The Wall Street Journal reported. The merger would create the nation's sixth-largest airline and would combine the carriers' extensive East Coast and West Coast route structures, creating a nationwide low-cost carrier.

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The newspaper reported that the airlines are negotiating to raise $400 million in equity investment and are also close to agreement on a $250 million loan from Airbus to cover 20 new A350 airplanes.

The deal would give Airbus its first North American customer for the A350, intended to compete with Boeing's new 787 Dreamliner.

Airline analysts generally agree that the carriers are a good match. Besides its East Coast operations, US Airways has routes to Europe and the Caribbean while America West has coveted routed to Hawaii as well as a route structure throughout the Western U.S.

By marrying their existing route structures, the carriers would be better able to compete for traffic from the Midwest and could wield effective transcontinental routes.

A merger agreement would provide US Airways with a route out of bankruptcy proceedings, during which it has reduced many of the personnel, leasing and debt costs that previously made it the highest-cost airline in the nation on a seat-mile basis.

The combined carriers could pose the first significant challenge to Southwest Airlines, currently the nation's leading low-cost carrier and by far its most profitable. It could also be a setback for United, also in bankruptcy.

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