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American CEO pans US Airways merger

By Ely Portillo
elyportillo@charlotteobserver.com

As American Airlines wends its way through bankruptcy court, CEO Tom Horton is pouring cold water on the idea of a merger with US Airways.

US Airways has hired advisers to examine the possibility of bringing the carriers together. Any such move could have big consequences for Charlotte Douglas International Airport, where US Airways and US Airways Express operate nearly 90 percent of the flights.

But Horton, in comments made to the Dallas Morning News editorial board on Thursday, seemed to dismiss any suggestion of a merger.

"This is not US Airways' first attempt at this. This is a small company very strategically limited, I would argue - not any international flying, hubs of less strategic importance," Horton said.

His remarks came a day after American issued a broad outline of its plan to cut costs and exit bankruptcy court as a standalone carrier. The Fort Worth-based carrier will seek to cut 13,000 jobs, about one out of every six workers, and to terminate its employee pension plan. It also plans to overhaul its fleet with more efficient planes, restructure leases and grow revenue by an average of $1 billion a year, partially by increasing departures from key cities.

On Thursday, Horton pointed to US Airways' checkered past in the merger arena.

"This will be their fourth try at this: twice for United, once for Delta while they were restructuring, now American. I would argue that this will be every bit as successful as their prior tries," Horton told the Dallas Morning News. "I'm not sure what's in the water out there in Phoenix. Maybe it's the cactus. I don't know what it is."

US Airways is headquartered in Tempe, Ariz., near Phoenix, and does fly international routes, though less extensively than American. US Airways is the smallest of the top five U.S. carriers, with just under 8 percent of the domestic market.

Michelle Mohr, a spokeswoman for US Airways, declined to comment Friday on Horton's remarks. American Airlines also declined to comment further.

Merger talk often simmers in the airline industry, but has heated up in the last few weeks since Delta and US Airways were both reported to be eyeing a bid for American. Delta was also reportedly examining the possibility of acquiring US Airways, a possibility several analysts have said is unlikely.

Charlotte has a big stake in whatever happens to US Airways, because of the preponderance of US Airways flights at Charlotte Douglas. There are also about 7,000 US Airways employees based at Charlotte, which is US Airways' busiest hub.

The modern US Airways was created through a merger with the smaller America West in 2005, as US Airways was in bankruptcy court. US Airways CEO Doug Parker was CEO of America West, and took over the combined company's top spot. Since then, as Horton said, Parker and US Airways have unsuccessfully tried for mergers three times, once with Delta while it was in bankruptcy court and twice with United.

Both United and Delta have since completed mergers - Delta with Northwest and United with Continental.

A merger attempt with American would be the fifth involving US Airways in seven years. Parker is well-known as an advocate of industry consolidation, which has helped airlines cut down on capacity, raise fares and institute fees for services such as checked bags. That, in turn, has helped the industry rebound from a wave of losses to profitability for the past two years.

Henry Harteveldt, an aviation analyst with the Atmosphere Group, called Horton's remarks "unnecessarily arrogant." But he did say that American is serious about not merging.

"Mr. Horton and his team absolutely want to see American remain independent. American doesn't want to be asked to dance," Harteveldt said. He also believes US Airways needs American more than American needs US Airways, as there are no other credible merger partners available.

"US Airways brings little to the (American) network that American couldn't get, if it really wanted to," said Harteveldt. "Without American, US Airways' future is uncertain. No other U.S. airline is available to US Airways to seek as it strives to enter more top markets."

Any merger offer would likely be months, if not more than a year, away, and Delta has reportedly also been looking at American. Although American hopes to come out of Chapter 11 bankruptcy as a standalone company, Horton acknowledged that might not happen.

"But look, if we don't get our act together, all sorts of things become possible," he told the Dallas Morning News. "It's very important that this company demonstrate progress on a credible business plan. And I think we've got a great one. I could not be more fired up about the future of American Airlines beyond the structuring."

"But we've got to do it. We've got to do the hard work. If we don't, there are alternatives."

Portillo: 704-358-5041

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