Could US Airways be the partner United is seeking?
Some say deal is possible, but Delta or Continental may be better candidates
Charlotte Business Journal - June 22, 2007by Katy StaffordStaff writer
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Comments last week by United Airlines' Chief Financial Officer Jake Brace have fueled speculation the carrier may be interested in a merger with US Airways Group Inc.
During a Merrill Lynch & Co. Inc. Global Transportation Conference, Brace said United is looking for a partner with a strong presence in the Northeast and a Southern hub with good access to the Caribbean and Latin America.
US Airways, the dominant carrier in Charlotte, fits most of that definition -- though it isn't the only airline that does.
Industry analysts say while a United/US Airways merger is possible, United, owned by UAL Corp., is more likely eyeing other carriers.
"I think the two he had in mind were Delta and Continental," says Michael Derchin, an airline analyst at FTN Midwest Securities Corp.
He says Delta, which emerged from bankruptcy earlier this year, and Continental would give United all three of the criteria it's looking for.
While US Airways, which has its largest hub at Charlotte/Douglas International Airport, does have a presence in the Northeast and a Southern hub with Caribbean connections, it does not have a strong Latin America network.
Ray Neidl, an airline analyst at Calyon Securities (USA) Inc., agrees. "United would like to merge with almost anyone," he says, "but US Airways is probably down the list."
US Airways has said it thinks industry consolidation is necessary, and it's looking for potential merger partners.
"We are willing to be the first mover," US Airways CFO Derek Kerr said at the Merrill Lynch conference. "We're not hesitant to make a move if it's the right time."
A US Airways spokeswoman declines to say if the company has been contacted by United or if it would be interested in a merger with the Chicago-based airline.
"We wouldn't talk about business dealings with any company," says Valerie Wunder, US Airways' spokeswoman. "United's opining could apply to other carriers. It's extremely early to be speculating."
Analysts agree if United, the country's second-largest airline, merged with US Airways, it would be good for Charlotte/Douglas.
"A lot of United people would be transferring in Charlotte," says Roger King, an airline analyst at CreditSights Inc. Charlotte/Douglas' "future would be much more stable."
Charlotte Aviation Director Jerry Orr agrees. "I thought that would have been a good marriage," he says of the two airlines' previous attempt to merge before Sept. 11, 2001. That effort was halted by the U.S. Department of Justice for antitrust reasons.
King says those issues no longer exist. "The Feds realized the airline industry needs to be consolidated. They would allow a merger. It's time for them to let the market work it out."
If United were to merge with Delta or Continental, US Airways and Charlotte/Douglas could suffer.
"That would put US Airways at a disadvantage," King says. A Continental/United merger "would threaten a lot of airlines."
Still, he thinks a United/US Airways merger may be in the cards because of US Airways' recent experience in combining with America West.
"One thing US Airways' management team has going for it is that it has merged two large airlines already," King says. "It makes it more attractive."
And, he says, no matter which airline US Airways merges with, Doug Parker, its chief executive, will play a big role in the management team.
"I think Doug Parker would have to be in the mix because he's the only guy to have integrated two major airlines," King says. "The America West team has shown to be very good."
And, he says, Parker is interested in running a larger airline. "I think Mr. Parker knows size matters," King says. "He still doesn't really have an international presence. He doesn't really have a presence in the Atlantic."
From a timing standpoint, Derchin thinks US Airways could enter into a merger next year, after it completes the America West integration.
US Airways' Wunder says the airline's attempted takeover of Delta "showed us it's all about timing, and another merger might not happen until the next industry downturn."
But United could make a move as soon as the end of this year, says Derchin, the FTN Midwest analyst. "United would want to do things as soon as possible. They have not been able to get their first or second choices (Continental or Delta) to entertain discussions."
And that may leave the door open for a deal with US Airways.
UP IN THE AIR
United Airlines wants to merge with an airline that has a strong Northeast presence and a Southern hub with a good Caribbean and Latin America network.
Possibilities include:
US Airways, which has its largest hub at Charlotte/Douglas and flies to 26 Caribbean cities and five in Latin America
Delta Airlines, which is based in Atlanta and flies to 15 Caribbean cities and 48 Latin American destinations
Continental Airlines, which is based in Houston and flies to 27 Caribbean cities and 50 in Latin America
Some say deal is possible, but Delta or Continental may be better candidates
Charlotte Business Journal - June 22, 2007by Katy StaffordStaff writer
Print this Article Email this Article Reprints RSS Feeds Most Viewed Most Emailed
Comments last week by United Airlines' Chief Financial Officer Jake Brace have fueled speculation the carrier may be interested in a merger with US Airways Group Inc.
During a Merrill Lynch & Co. Inc. Global Transportation Conference, Brace said United is looking for a partner with a strong presence in the Northeast and a Southern hub with good access to the Caribbean and Latin America.
US Airways, the dominant carrier in Charlotte, fits most of that definition -- though it isn't the only airline that does.
Industry analysts say while a United/US Airways merger is possible, United, owned by UAL Corp., is more likely eyeing other carriers.
"I think the two he had in mind were Delta and Continental," says Michael Derchin, an airline analyst at FTN Midwest Securities Corp.
He says Delta, which emerged from bankruptcy earlier this year, and Continental would give United all three of the criteria it's looking for.
While US Airways, which has its largest hub at Charlotte/Douglas International Airport, does have a presence in the Northeast and a Southern hub with Caribbean connections, it does not have a strong Latin America network.
Ray Neidl, an airline analyst at Calyon Securities (USA) Inc., agrees. "United would like to merge with almost anyone," he says, "but US Airways is probably down the list."
US Airways has said it thinks industry consolidation is necessary, and it's looking for potential merger partners.
"We are willing to be the first mover," US Airways CFO Derek Kerr said at the Merrill Lynch conference. "We're not hesitant to make a move if it's the right time."
A US Airways spokeswoman declines to say if the company has been contacted by United or if it would be interested in a merger with the Chicago-based airline.
"We wouldn't talk about business dealings with any company," says Valerie Wunder, US Airways' spokeswoman. "United's opining could apply to other carriers. It's extremely early to be speculating."
Analysts agree if United, the country's second-largest airline, merged with US Airways, it would be good for Charlotte/Douglas.
"A lot of United people would be transferring in Charlotte," says Roger King, an airline analyst at CreditSights Inc. Charlotte/Douglas' "future would be much more stable."
Charlotte Aviation Director Jerry Orr agrees. "I thought that would have been a good marriage," he says of the two airlines' previous attempt to merge before Sept. 11, 2001. That effort was halted by the U.S. Department of Justice for antitrust reasons.
King says those issues no longer exist. "The Feds realized the airline industry needs to be consolidated. They would allow a merger. It's time for them to let the market work it out."
If United were to merge with Delta or Continental, US Airways and Charlotte/Douglas could suffer.
"That would put US Airways at a disadvantage," King says. A Continental/United merger "would threaten a lot of airlines."
Still, he thinks a United/US Airways merger may be in the cards because of US Airways' recent experience in combining with America West.
"One thing US Airways' management team has going for it is that it has merged two large airlines already," King says. "It makes it more attractive."
And, he says, no matter which airline US Airways merges with, Doug Parker, its chief executive, will play a big role in the management team.
"I think Doug Parker would have to be in the mix because he's the only guy to have integrated two major airlines," King says. "The America West team has shown to be very good."
And, he says, Parker is interested in running a larger airline. "I think Mr. Parker knows size matters," King says. "He still doesn't really have an international presence. He doesn't really have a presence in the Atlantic."
From a timing standpoint, Derchin thinks US Airways could enter into a merger next year, after it completes the America West integration.
US Airways' Wunder says the airline's attempted takeover of Delta "showed us it's all about timing, and another merger might not happen until the next industry downturn."
But United could make a move as soon as the end of this year, says Derchin, the FTN Midwest analyst. "United would want to do things as soon as possible. They have not been able to get their first or second choices (Continental or Delta) to entertain discussions."
And that may leave the door open for a deal with US Airways.
UP IN THE AIR
United Airlines wants to merge with an airline that has a strong Northeast presence and a Southern hub with a good Caribbean and Latin America network.
Possibilities include:
US Airways, which has its largest hub at Charlotte/Douglas and flies to 26 Caribbean cities and five in Latin America
Delta Airlines, which is based in Atlanta and flies to 15 Caribbean cities and 48 Latin American destinations
Continental Airlines, which is based in Houston and flies to 27 Caribbean cities and 50 in Latin America
