US Airways courting United Airlines for possible merger

The Business Journal of Phoenix

Roughly a year after being spurned by Delta Air Lines, US Airways Group Inc. is courting another rival: United Airlines.

Talk on Wall Street, new reports (including an Associated Press story Monday saying merger talks were hot and heavy) and comments posted on aviation message boards of late have centered around a possible corporate marriage between US Airways and United.

In 2000, US Airways and United tried to merge in 2000, but that deal was blocked by the U.S. Department of Justice. Now there's speculation the two may try again -- and that they could announce a deal as soon as today.

US Airways CEO Doug Parker has done little to calm the speculation. He sent a memo earlier this month to US Airways employees saying consolidation is needed in an airline sector hit by high fuel prices and tight operating margins.

The Parker memo and new merger talk comes on the heels of Delta's proposed union with Northwest Airlines in a $17 billion deal. Delta turned down an $11 billion offer from US Airways (NYSE: LCC) in 2007.

"We don't comment on rumor or speculation," said US Airways spokesman Morgan Durrant.

United's parent company, UAL Corp. (Nasdaq: UAUA), also has been looking at mergers in the wake of the Delta/NWA plan. Its potential partners include Continental Airlines and US Airways.

"Our strategy is consistent. Consolidation is under way. Ensuring you have the right partner is everything. We will pursue all options to ensure a strong, sustainable future for our airline and will not shy away from the tough choices necessary to create value for our shareholders and benefit our employees and customers," UAL/United Chairman and CEO Glenn Tilton said in a statement on Sunday.

A US Airways/United merger would create a mega-airline. United has 3,200 daily flights, with hubs in Los Angeles, San Francisco, Denver, Chicago and Washington. US Airways has 3,500 daily flights, with hubs in Phoenix, Philadelphia and Charlotte, N.C.

Both carriers also have a number of international flights.