Could US Airways boss Doug Parker be thinking about a merger -- again?
Fresh from creating the nation's fifth-largest carrier last fall with the union of the old US Airways and America West Airlines, the boyish-looking chief executive officer admitted in an interview yesterday that the subject of consolidation is still on his mind. And he hinted that the most attractive combinations for US Airways could involve the country's third- or fourth-largest carriers, Delta Air Lines and Northwest Airlines.
Both of those carriers are still in bankruptcy, and as US Airways learned in 2003 and 2005, both will be able to drastically reduce costs by giving unneeded airplanes back to lenders or renegotiating labor contracts -- making either company more attractive to potential partners.
It "presents an opportunity that may not exist for a long, long time," said Mr. Parker, who was in Moon yesterday to dedicate a new US Airways aircraft outfitted with an old Allegheny Airlines tail logo.
Surrounded at a US Airways hangar yesterday by autograph seekers and requests for group photographs, the popular Mr. Parker was careful to point out that no official talks are under way.
But as Delta and Northwest get closer to emerging from bankruptcy, they may look for a merger partner on the way out, as US Airways did in 2005, and if that happens "we will be there to talk to them," Mr. Parker said. "It's not like something is certainly going on or we are actively working on anything right now." But, "we can't ignore it. It is too big a deal, and it may not come around again."
Talk of more mergers in the U.S. airline industry is heating up again as the major carriers recover from five years of extreme pain and more than $30 billion in losses. One good sign was that the newly merged US Airways made money in this year's first quarter despite the soaring costs of oil and jet fuel, and several other carriers reported operating profits, too.
All mainline carriers are seeing the benefits of cutting unprofitable routes wherever possible, taking unneeded seats out of the sky and raising prices -- even as demand from the traveling public remains strong.
But the times haven't been so good for the smaller discounters that gained so much ground in recent years .
JetBlue Airways, which begins service in Pittsburgh today to Boston and New York and yesterday again topped other airlines in customer-satisfaction scores from J.D. Power & Associates, has turned in two consecutive quarterly losses and scrapped long-haul routes in favor of shorter routes while delaying orders for 12 aircraft and announcing plans to sell five more. And Independence Air went out of business.
Still, even with the many cuts among major carriers and Independence Air's exit, some observers argue the industry needs more cutting and consolidation, saying it will make the remaining carriers healthier. "Basically, we still have too many seats, too many hubs and too many legacy carriers," said Ray Neidl, an airline analyst with Calyon Securities in New York.
Another factor fueling the merger speculation is the feeling that antitrust regulators in Washington, D.C., are more willing to consider new business combinations than they were just a few years ago -- a trend Mr. Parker alluded to yesterday.
So, what carriers are out there looking? United Airlines, which recently emerged from bankruptcy, Delta, Continental Airlines and US Airways are all interested in more consolidation, according to longtime Virginia airline consultant Darryl Jenkins, who advises carriers around the country.
American, the nation's No. 1 carrier, is not interested, he said, nor are Northwest or Alaska Airlines -- the latter frequently mentioned as a possible merger partner for many of the nation's largest carriers. Because its route network is so different than most, Alaska is "one of the most attractive merger candidates," Mr. Jenkins said. But, "I think they are the least likely to want to merge with anyone else."