United and US Airways Said to Be in Merger Talks
April 7, 2010, 5:04 pm
7:36 p.m. | Corrected The UAL Corporation, the parent of United Airlines, and US Airways are in talks to merge, in a potential deal that would create one of the world’s largest airlines, people briefed on the matter told DealBook on Wednesday.
The negotiations are the latest efforts to consolidate the struggling airline industry. Both companies have been vocal in calling for greater consolidation within the industry to help prop up falling revenues, with United’s chief executive, Glenn F. Tilton, among the leading proponents for more mergers.
“The investor seems to have spoken,” Mr. Tilton told The Financial Times in February. “The market seems to have suggested that scope and scale in a global business are important.”
United and US Airways are deep in their merger discussions, though a transaction is not expected to be announced for at least several weeks, these people said, cautioning that talks may still collapse. One potential hurdle could be union opposition.
Terms of the deal could not be learned. One issue being worked on is the management structure of the combined company, these people said.
The airlines have come close to merging several times over the last decade. In 2000, they announced a $4.3 billion deal, only to withdraw after fierce opposition from the Justice Department and unions. They tried again in 2008, but ended talks after several months of negotiations.
Jean Medina, a United spokeswoman, and Andrew Christie, a US Airways spokesman, declined to comment.
The talks are being driven in large part by cost savings. Both sides have sought to lower costs, but believe they can achieve greater efficiencies together, these people said.
Previous talks were held up because of the complexity of putting together the various union contracts covering each airline’s employees, as well as sorting out which union would represent workers and how to account for their seniority.
There have also been recurring strategic doubts about how well the two airlines fit together. A combination of the two carriers would end up with a multitude of hubs, including United’s operations in Chicago and Denver and at Washington Dulles International Airport. For its part, US Airways has hubs in Philadelphia, Phoenix and Charlotte, N.C., as well as extensive operations in the Washington area.
Executives and analysts have predicted more consolidation in the ailing airline industry since the merger between Delta Air Lines and Northwest Airlines. Airlines have lost money for much of the last decade, battered by high fuel costs and more recently by the recession. They have scrambled to cut capacity, lower their costs, and have been looking for inventive new ways to raise revenues, like charging for bags and meals.
But with both leisure and business travel down steeply, many analysts have argued that the United States still has too many airlines chasing too few passengers.
United had also held merger talks with Continental Airlines in 2008. And US Airways pursued an unsolicited bid for Delta in late 2006, but withdrew after several months amid fierce opposition from Delta’s unions.
– Andrew Ross Sorkin, Michael J. de la Merced and Jad Mouawad
The New York Times
http://dealbook.blogs.nytimes.com/2010/04/07/united-and-us-airways-hold-merger-talks/?hp
April 7, 2010, 5:04 pm
7:36 p.m. | Corrected The UAL Corporation, the parent of United Airlines, and US Airways are in talks to merge, in a potential deal that would create one of the world’s largest airlines, people briefed on the matter told DealBook on Wednesday.
The negotiations are the latest efforts to consolidate the struggling airline industry. Both companies have been vocal in calling for greater consolidation within the industry to help prop up falling revenues, with United’s chief executive, Glenn F. Tilton, among the leading proponents for more mergers.
“The investor seems to have spoken,” Mr. Tilton told The Financial Times in February. “The market seems to have suggested that scope and scale in a global business are important.”
United and US Airways are deep in their merger discussions, though a transaction is not expected to be announced for at least several weeks, these people said, cautioning that talks may still collapse. One potential hurdle could be union opposition.
Terms of the deal could not be learned. One issue being worked on is the management structure of the combined company, these people said.
The airlines have come close to merging several times over the last decade. In 2000, they announced a $4.3 billion deal, only to withdraw after fierce opposition from the Justice Department and unions. They tried again in 2008, but ended talks after several months of negotiations.
Jean Medina, a United spokeswoman, and Andrew Christie, a US Airways spokesman, declined to comment.
The talks are being driven in large part by cost savings. Both sides have sought to lower costs, but believe they can achieve greater efficiencies together, these people said.
Previous talks were held up because of the complexity of putting together the various union contracts covering each airline’s employees, as well as sorting out which union would represent workers and how to account for their seniority.
There have also been recurring strategic doubts about how well the two airlines fit together. A combination of the two carriers would end up with a multitude of hubs, including United’s operations in Chicago and Denver and at Washington Dulles International Airport. For its part, US Airways has hubs in Philadelphia, Phoenix and Charlotte, N.C., as well as extensive operations in the Washington area.
Executives and analysts have predicted more consolidation in the ailing airline industry since the merger between Delta Air Lines and Northwest Airlines. Airlines have lost money for much of the last decade, battered by high fuel costs and more recently by the recession. They have scrambled to cut capacity, lower their costs, and have been looking for inventive new ways to raise revenues, like charging for bags and meals.
But with both leisure and business travel down steeply, many analysts have argued that the United States still has too many airlines chasing too few passengers.
United had also held merger talks with Continental Airlines in 2008. And US Airways pursued an unsolicited bid for Delta in late 2006, but withdrew after several months amid fierce opposition from Delta’s unions.
– Andrew Ross Sorkin, Michael J. de la Merced and Jad Mouawad
The New York Times
http://dealbook.blogs.nytimes.com/2010/04/07/united-and-us-airways-hold-merger-talks/?hp
