US Airways Group is studying a potential merger with bankrupt AMR Corp. that would fix a weak domestic route system at American Airlines and boost revenue, two people familiar with the matter said.
President Scott Kirby is leading US Airways' analysis of how to combine the airlines, said the people, who asked not to be identified because the matter is private. Any bid may still be close to a year away because Fort Worth-based AMR now holds the exclusive right to file a reorganization plan, the people said.US Airways spokeswoman Michelle Mohr declined to comment, as did American spokesman Sean Collins.American has pared its flight network so far that some corporate travelers have gone elsewhere, leaving it unable to support most of its hubs, one person said. That deficiency could be solved by blending American, the third-largest U.S. airline, with US Airways, the fifth-largest, the people said."Unsecured creditors would get a better return out of a merged airline than American trying to go it alone," said Jeff Straebler, an independent airline analyst based in Connecticut.The combination would hold about a 20 percent domestic market share, basically putting it on equal footing with United Continental Holdings, Delta Air Lines and Southwest Airlines, Straebler said. Those airlines rank first, second and fourth in the U.S. by traffic.A merger attempt is likely, though Tempe, Ariz.-based US Airways is still weighing options, the people said. Any plan would evolve as AMR settles issues such as pensions and labor contracts in court, one person said.Traffic to American's hubs would grow by funneling in travelers from US Airways, the person said. In turn, a stronger domestic system would feed into American's routes across the Atlantic and to Latin America, said the person, who declined to give financial details because the numbers are preliminary.A merger with American would shrink the U.S. industry to three major full-service airlines, increasing their power to raise fares. The combined airline would surpass Delta as the second-biggest U.S. airline and fulfill US Airways CEO Doug Parker's call for consolidation.The current US Airways was created in 2005 when Parker, then CEO of America West Holdings, orchestrated a merger to bring the old US Airways out of bankruptcy. He failed in three additional merger attempts since 2006, including a hostile bid for Delta when it was in Chapter 11.American's passenger revenue for each seat-mile, an industry benchmark, trailed that of US Airways, United Continental and Delta through 2011's first three quarters, according to data compiled by Bloomberg.American's hubs include Dallas-Fort Worth, Los Angeles, Miami, New York and Chicago, while US Airways has major operations in cities such as Charlotte, N.C.; Philadelphia; and Phoenix.Have more to add? News tip? Tell us
