US Airways Confirms Merger Talks

US Airways is in talks to merge with Arizona-based America West Airlines, US Airways Chairman David Bronner said Tuesday.

Such a combination could create a national low-cost, low-fare airline that flies from hubs on two coasts -- a new breed of carrier in the struggling U.S. airline industry.

Bronner said US Airways has approached several rival carriers about a merger, but discussions with America West have progressed the furthest.

No deal is imminent, and numerous issues must still be resolved, he said.

"A lot of things will happen in the U.S. airline industry in the next 12 to 18 months," Bronner told The Associated Press. "We'll do whatever we need to survive."

A spokesman for America West Holdings Corp., America West's parent, declined to discuss what he called a "market rumor."

Some analysts have been skeptical of a merger, saying it might not make sense for America West to enter into a costly partnership with a struggling carrier. US Airways, the nation's seventh-largest carrier and Charlotte's dominant airline, is in its second bankruptcy restructuring. America West, the No. 8 U.S. carrier, lost nearly $90 million last year.

Any deal would need approval from governmental entities and businesses, including key US Airways creditors, a bankruptcy judge and federal regulators.

The effect on US Airways' Charlotte hub is unclear. About 5,700 of the airline's 29,500 employees are based in Charlotte. But any US Airways merger would probably do little to dampen the trend toward lower airfares out of Charlotte. Both US Airways and America West are offering lower fares, and analysts believe more low-fare airlines are headed to Charlotte regardless of US Airways' fate.

Rumors about a deal with America West have been circulating since a JP Morgan analyst said two weeks ago that there was "early speculation" about a US Airways-America West "linkage."

In the past, America West has said it is interested in expanding its reach beyond its predominantly West Coast base. The company's CEO, Doug Parker, said in February that his airline would "look aggressively at all opportunities" to help consolidate the industry.

Citing people familiar with the matter, The Wall Street Journal reported on its Web site late Tuesday that a merged airline would immediately begin flying under the US Airways name but would keep operations separate while the two companies combined aircraft and employees.

With hubs in Phoenix and Las Vegas, America West flies mostly in the Western U.S., although it offers limited service to about two dozen East Coast cities, including Washington, New York and Boston. US Airways' revenues are about three times the size of America West's.

"Some sort of an alliance could work, but a merger, I don't see it," industry analyst Mike Boyd told the Observer. "US Airways would bring nothing but grief to America West."

Boyd said one key to any deal could be Mesa Air, a regional airline that flies commuter jets for both US Airways and America West. If there were some kind of financial arrangement among US Airways, America West and Mesa, a deal could make sense, Boyd said.

Since filing for bankruptcy protection in September, US Airways has cut $1 billion a year in labor costs and trimmed other expenses. In recent months, it has won conditional pledges totaling $250 million in outside investment from two regional carriers, Air Wisconsin and Republic Airways. It has said it needs another $100 million to leave bankruptcy protection.

The scenario under discussion with America West would require US Airways to find additional money and perhaps $250 million in new loans, according to the Journal. If the merger were consummated, a holding company would give stock in the new company to America West shareholders, US Airways creditors and new investors.

Although mergers often lead to big layoffs, some US Airways workers say they hope any combination with America West would save jobs, since the two carriers' routes have little overlap.

"I think it (a merged airline) would be a force to be reckoned with on both sides of the industry spectrum," Mike Flores, a US Airways flight attendant union leader in Charlotte, told the Observer.

Flores, who has been through two US Airways mergers, with Piedmont and PSA, said workers in today's fragile airline industry are more open to such deals than in the past.

More information on any potential merger could come today, when America West discusses its first-quarter earnings in a conference call with analysts.