US Airways was boosted twice last week, with US government approval for a planned alliance with United Airlines and court clearance to abandon 144 leased and financed aircraft if creditors refuse to reduce rates.
Since the US Department of Justice (DoJ) rejected the planned merger with United last year, the airlines' financial positions have deteriorated significantly. US Airways, the seventh largest US carrier, is now under Chapter 11 bankruptcy protection and United Airlines, the second largest, may soon follow.
The tie-up could help the airlines pull through. Analyst Phil Baggaley of Standard & Poor's says: "I don't see much near-term impact on revenues. It does strengthen the restructuring efforts at both companies, and could help in negotiations with labour. Chiefly it will help psychologically, and it will strengthen the business plan, which will facilitate getting [federal loan guarantee] approval."
Although the Department of Transportation (DoT) believes that the alliance "will not be the equivalent of a merger", the two carriers have 23% of the US domestic market - more than the largest US carrier American Airlines - and the DoT has "a number of concerns."
Consequently, the carriers have agreed to several DoJ conditions. These include bans on codesharing on certain non-stop routes, inclu-ding between hubs, such as Philadelphia-Los Angeles, and on services from Washington Dulles or National airports to the same destination, with the exception of the Washington DC/New York/ Boston shuttle. On routes served by only one partner, both must offer the same fare, and similarly, where both are operating comparable services, fares must be the same.
The alliance will marry US Airways' strength on the US east coast and the Caribbean with United's strong western US and international network. "The US Airways alliance with United is a vital part of our business plan. It will enhance our revenue and marketing capabilities while offering substantial benefits to air travellers," says David Segal, US Airways' chief executive. The DoT may now favour an agreement bet-ween Continental Airlines, Delta Air Lines and Northwest Airlines. Baggaley believes that the "prospects for Delta/Continental/ Northwest have now improved, but [the alliance] is larger, so the odds are not quite as good."
At the same time, a Virginia bankruptcy court has allowed US Airways to reject leases on 62 Boeing 737s, one 757-200, four 767-200s and 26 Bombardier Dash 8s if lessors refuse to reduce rates. It can also discard 21 757-200s, 19 737s, two 767-200ERs and nine Dash 8s if new financing terms cannot be reached. US Airways has already been cleared to return 67 other mainly parked aircraft.
Source: Flight International
