US Airways exec says ready to work out a deal with American

US Airways President Scott Kirby is bullish about the airline industry and about the prospects for combining his airline with American Airlines.

Speaking to a Bank of America-Merrill Lynch investors conference in Boston on Thursday, Kirby said a merger of US Airways and American "would create a company that can compete with United and Delta," the two airline heavyweights created by prior mergers.

A rebuilt American would as a result of the merger have a much stronger route network with greater efficiencies and capacity for creating revenues, particularly from premium business travelers.

"You have to have a route network like Delta and United if you're going to compete with Delta and United," Kirby said.

Americans announcement last week that it was at least willing to discuss a possible merger while it is in bankruptcy was a positive step. "We're encouraged that we're able to work with American and the creditors committee," Kirby said. "At the end of the day we hope to get the deal done."

Kirby was asked why US Airways believes it can pull of a merger with american and integrate the two airline's operations when it hasn't fully completed the integration with America West. The company does not have new labor agreements with its pilots because the two groups of pilots have not come to an agreement on seniority issues, and are involved in a court fight.

US Air pilots would have a "huge incentive" to get a deal done and to work one out with American's pilots, Kirby said. The terms of the proposed deal US Air has worked out with the Allied Pilots Association, the American pilots union, US Air pilots would be in line for sizable pay raises if the two carrier are merged.

A replay of Kirby's presentation is available on the US Airways web site.

Meanwhile, MIT airline analyst William Swelbar is, to say the least, a tad skeptical of the idea of US Airways-American marriage working out nicely. He thinks USAir officials are wearing rose colored glasses, somehow claiming that under their the combined airline could compete with United despite having thousands more employees.

In its quest to acquire American Airlines, US Airways sounds like a teenager with its first credit card, spending money it doesn’t have.  Paper wealth.  What cracks me up about this “plan” is the new math I mentioned. Critics pan AA’s goal of creating $1 billion in new revenue as bogus because, among other issues, it assumes no competitive response.  Does anyone really think United and Delta are going roll over and let US Airways improve its revenue generation at their expense? Not a chance.

 But neither United nor Delta are afraid of competition much less the threat posed by the paper tiger US Airways/American combination.   Smisek and Delta’s Richard Anderson are smart. They know the synergy formula US has seduced some media and AA’s unions with is but a calculation at this point.  Even American’s own pilots admitted in bankruptcy court this week its faux “deal” with US doesn’t include cost assumptions or valuations.
- Bob Cox

Read more here: http://blogs.star-telegram.com/sky_talk/2012/05/us-airways-exec-says-ready-to-work-out-a-deal-with-american.html#storylink=cpy