New Airline Wants To Take On SWA

What appears to be good news for both US Airways and America West in their planned merger could end up being bad news for the entire airline industry, some analysts warned, because the newly-proposed company will use capacity that might otherwise have ended up in the boneyard.

"For the industry it makes things tougher because this is capacity that would have been knocked out the system" if US Airways had failed to recover from bankruptcy, said Ray Neidl, an analyst at Calyon Securities in New York, in an interview with Reuters. "If you have a stronger US Airways then there's going to be more pressure on Spirit, Delta and AirTran."

Not only would US Airways survive on the $1.5 billion in new capital it promises to bring to the table. It would actually become something of a financial powerhouse, according to some industry-watchers.

Others on Wall Street remained skeptical, pointing out that the last big merger to rock the airline industry -- American Airlines' buyout of TWA -- did very little for the stockholders in either company.

But executives at Merrill Lynch pointed out that the new entity would get rid of about 60 aircraft over three years -- seats that would otherwise keep flying.

No matter how you look at it, though, the deal will probably be felt the most by Delta, according to consultant Michael Roach, who was the founding president of America West. He now runs Roach & Sbarra Airline Consulting, based in San Francisco.

"Anything that strengthens US Airways in the East is going to be bad for Delta," he told Reuters.

Other analysts predicted the merger would probably have some negative impact on AirTran as it found itself head-to-head with the newly-formed company in several different markets.

But the biggest unknown would be felt by the most powerful of the low-cost carriers: Southwest. In his remarks at Thursday night's news conference in Tempe, AZ, Doug Parker, the America West CEO who will lead the new entity if it is approved by regulators and the bankruptcy court, said the combined company would become a nationwide low-cost carrier with major facilities in direct competition with Southwest Airlines.

FMI: www.usairways.com, www.americawest.com