US Airways and America West made it official Thursday, releasing details of their long-awaited merger. If all goes as planned, the deal will create the first full-service nationwide carrier with the pricing structure of a low-fare airline.
"Operating as the first national low-cost hub-and-spoke network carrier, customers can look forward to simplified pricing, international scope, access to low-fare service to over 200 cities across the U.S., Canada, Mexico, the Caribbean and Europe, and amenities that include a robust frequent flyer program, airport clubs, assigned seating and First Class cabin service," the airlines said in a statement.
As in all marriages, the parties bring both assets and liabilities. US Airways has a huge route structure up and down the East Coast; ditto America West on the West Coast. US Airways, much bigger and older that its new partner, has a troubled history and is on its second bankruptcy; America West, a relative newcomer, has its own cash problems but is in better shape than most major carriers.
The new airline will be called US Airways but will be based in Tempe, Arizona, current home of America West, leaving behind US Airways' longtime headquarters adjacent to Washington's Reagan National Airport in Arlington, Virginia.
The companies plan to create a holding company that will own both airlines and operate them as separate companies for two to three years while the operations are combined. The frequent flier programs and route structures will be combined more quickly, giving regular customers many more options than they now have.
Customers
In their statement announcing the merger, the carriers stressed that their frequent fliers would not lose any of their current miles or other benefits.
"Both airlines' frequent flyer programs will ultimately be combined once the merger is complete. Members of both programs will retain all of their miles and elite status designation and will receive similar benefits in the merged airline's frequent flyer program. Other customer amenities will include access to airport clubs, assigned seating and First Class upgrades," the companies said."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," US Airways CEO Bruce Lakefield said.
The Carriers
US Airways/US Airways Express currently serves 179 cities and America West/America West Express serves 96 cities. When merged, the combined airline will become the nation's fifth largest airline, as measured by domestic Available Seat Miles. The combined airline is expected to operate a mainline fleet of 361 planes (supported by 239 regional jets and 57 turboprops for feed into the mainline system), down from a total of 419 mainline aircraft operated by both airlines at the beginning of 2005.
US Airways projects returning 25 additional aircraft by the end of 2006, in addition to the 46 aircraft that US Airways already has announced it plans to return. Nearly all of the aircraft are being returned to General Electric Capital Aviation Services, the companies said.
The combined airline also will take delivery of 13 Airbus A320 family aircraft previously ordered by America West Airlines. Airbus has also agreed to reschedule and reconfirm 30 narrow body A320-family aircraft deliveries from 2006 -- 2008 to 2009 -- 2010. To rationalize international flying, the merged company will work with Airbus to transition to an all-Airbus international fleet of A330 aircraft and, beginning in 2011, A350 aircraft.
Once fully integrated, the airline plans to have primary hubs in Charlotte, Phoenix and Philadelphia, and secondary hubs in Las Vegas and Pittsburgh. The merged airline plans to have focus cities in Boston, New York/LaGuardia, Washington, D.C., and Fort Lauderdale.
W. Douglas Parker, the CEO of America West, will head the combined company, while US Airways CEO Lakefield will become vice chairman. US Airways currently employs 30,100 people and America West employs 14,000 people.
Investors in the new company, contributing $350 million, include Air Wisconsin, Air Canada parent ACE Aviation Holdings and two private investment firms. Airbus has agreed to hold a note for $250 million and a credit card company will be hit up for $300 million for the right to issue branded credit cards to US Airways customers.
The deal announced today amounts to an outline. There are numerous obstacles ahead and the transaction isn't expected to close until this fall at the earliest. Among potential roadblocks is the federal Air Transportation Stabilization Board, which has guaranteed $1 billion in loans to the two carriers. It will have to agree to restructure the loans.
