The airline business is all atwitter today with the news that US Airways, which has been wallowing in a chapter 22 (i.e., it’s second chapter 11 case) since September of last year, is considering a merger with America West to form the sixth largest airline and the largest discount airline in the United States. Here are some previous posts over the past year or so on U.S. Air’s various travails.
H’mm, let’s set the buzz aside and take a look at this deal. Last year, US Airways posted a net loss of over $600 million on revenue of just north of $7 billion. In addition to two chapter 11 cases within two years, it’s got all kinds of union problems, operational and customer problems, and competition problems.
Meanwhile, America West narrowly escaped a chapter 11 case in late 2001 by arranging a bailout loan of over $400 million backed by almost an equivalent amount of federal guarantees. That financing allowed the airline to tap more than $600 million in other financing and concessions from manufacturers, vendors, leasing firms and others. Nevertheless, America West posted a net loss last year of almost $90 million on revenue of about $2.35 billion, and ended 2004 with a bit over $400 million in cash.
I don’t think this proposed merger has Southwest Airlines quaking in its boots.