Wednesday, April 20, 2005

US Air, America West Hint at a Deal

Despite executives at America West and US Airways refusing to confirm any rumors, it has been reported that the a merger may occur between the low-cost carrier America West, and the bankrupt US Air.

This is an interesting development, because historically, a profitable airline merging with a bankrupt one has not been a wise business move. America West has recently posted small earnings, while US Airways has lost a great deal of money.

America West's stock dropped 7 percent as news of the merger grew. Executives of America West have claimed that they believe a merger between themselves and another airline is inevitable. It is very possible that this merger may not occur, as many obstacles have to be overcome before it is pulled off. Memories of the failed merger between US Airways and United Airlines come to mind.

This merger could potentially hurt America West, but executives at US Airways seem to believe it may save (or at least greatly help) their airline. If the two airlines did merge, they would form a national low-cost carrier that could rival Southwest Airlines.

1 comment:

Amie said...

I think with merger, one parterner (usually the smaller one) would of course be hurt. But sometimes it is inevitable since with a single company you can't compete with others that hold huge power. And I think if the two airline companies merge, they will re-range their capitals, which may leads to a increasing on earning per share.