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Airline Consolidation 'Inevitable,' CEO Says

America West to Consider Mergers

By Keith L. Alexander
Washington Post Staff Writer
Thursday, April 21, 2005; Page E04

America West Holding Corp. president and chief executive W. Douglas Parker said yesterday that the airline industry is ripe for consolidation after a period of sharp cuts in labor costs and that bankrupt carriers in particular make enticing merger targets.

His comments come a day after reports that America West was in talks with US Airways Group Inc. over a possible merger or major equity stake.

America West Holdings Corp. chief executive W. Douglas Parker said struggling airlines could help themselves by consolidating. (Paul Connors -- AP)

US Airways in Talks With America West (The Washington Post, Apr 20, 2005)
Airline Industry Losses to Widen In 1st Quarter (The Washington Post, Apr 14, 2005)

"Consolidation of the airline industry is inevitable," Parker said in a conference call with Wall Street analysts. "America West may eventually play a role in that consolidation. We will look aggressively at potential transactions if and when they arrive."

Parker said federal government regulators are likely becoming more willing to approve airline mergers. "Regulators are tired of hearing airlines say they need more help," he said. "One way for airlines to help themselves is to be able to consolidate."

Parker would not comment specifically on the talks with US Airways. But in the conference call, he said labor costs had often presented major financial hurdles in previous airline merger attempts. He added that airlines under bankruptcy court protection were attractive takeover candidates because the leases on excess aircraft could be jettisoned, easing the financial burden of the acquiring airline.

US Airways, which has been in bankruptcy protection since September, has cut more than $1 billion in its labor costs and has already rejected several of its older aircraft leases.

During the investor call, Parker said that if America West entered into a merger with or made any type of equity investment in US Airways, it would not use its own capital. America West has about $345 million in cash, and Parker said the airline planned to increase its capital during the next three months.

"Anything that America West is involved in would not involve using America West cash on hand for any kind of transaction," Parker said.

Benchmark Capital analyst Helane Becker said Parker would not risk his reputation of having successfully transformed America West into a profitable low-cost carrier from a struggling traditional hub-and-spoke airline merely to expand America West's presence along the East Coast through an expensive merger with US Airways.

"He is not willing to jeopardize America West as an ongoing concern going forward," Becker said.

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