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Airline Consolidation 'Inevitable,' CEO Says

She said an outside investor might help finance a deal between the two airlines.

One possible broker may be Texas Pacific Group. An investment unit of Texas Pacific Group holds a 55 percent stake in America West that includes 100 percent of the company's Class A stock, according to its most recent proxy statement.

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)

During US Airways' first round in bankruptcy protection in 2002, Texas Pacific Group, led by financier David Bonderman, lost a bid to buy a majority stake in US Airways. A Texas Pacific spokeswoman yesterday declined to comment on the America West speculation.

For its part, US Airways sought to continue with business as usual. In a special telephone message to employees, Bruce R. Lakefield, US Airways president and chief executive, said the airline was focusing on its plan to emerge from bankruptcy protection and on its efforts to raise new capital through a "substantial equity investment." In the message, Lakefield acknowledged that the Arlington carrier was in discussions with a "number of interested parties" as it finalized its strategic plan to exit Chapter 11.

"While this process continues, however, I encourage all employees to keep doing what you do best to take care of our customers. Please stay focused on your work, with the comfort and safety of our passengers at the top of the list," Lakefield said.

America West's Parker has been a leading voice within the industry for airline consolidation. Last fall, he led a bid to acquire rival ATA Airlines, a budget carrier that had filed for bankruptcy. But Parker eventually backed away from the move because ATA's leases were too costly.

Acquiring US Airways would be a major undertaking for America West, the nation's eighth-largest carrier. US Airways, the nation's seventh-largest airline, has 28,000 employees and is nearly twice the size of America West.

But America West is stronger financially than most other larger carriers. Yesterday, the airline surprised Wall Street by reporting first-quarter earnings of $33.6 million. Consensus estimates compiled by Thomson Financial had predicted a loss of about $21 million. During the same period a year ago, America West reported a loss of $1.6 million.

Yesterday, AMR Corp., parent of American Airlines, the world's largest carrier, reported a loss of $162 million, down from a loss of $166 million during the comparable 2004 quarter. Continental Airlines, the nation's No. 5 carrier, yesterday reported a first-quarter loss of $184 million, compared with a loss of $124 million in the corresponding period a year ago.

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