The proposed merger of America West and US Airways earned the approval of a federal antitrust official.
With both carriers serving different regions of the country, the Justice Department saw no potential injury to competition as it approved a merger that will create a low-fare carrier with $1.5 billion USD in new financing.
The new combined airline would be the fifth largest in the United States, just ahead of Southwest Airlines. Currently, America West focuses on Western states, while US Airways major presence has been in the east.
“There is very little overlap between the networks of America West and US Airways,” said R. Hewitt Pate, the Justice Department’s antitrust chief, in a Bloomberg report. The combination “will enable the merged airline to offer U.S. consumers more and better service to more destinations throughout the country.”
When the merger is completed, the airline will work under the US Airways brand. Its base of operations will be Tempe, Arizona, where America West executives will run the airline.
In a USA Today article, America West CEO Doug Parker has been quoted as saying the combined airline, even given US Airways history, could be profitable with oil prices at $50 per barrel.
How about $60 a barrel, a price touched briefly yesterday before dropping to slightly under it? America West says that’s not a problem, either. According to Scott Kirby, America West’s executive vp of sales and marketing, said increased airfares and more flight cutbacks are the reason.
That’s simply supply and demand. Airlines, which recently increased fares according to a quick check of travel web sites, will fly fewer flights. It’s an interesting position Mr. Kirby espouses, since the combined carrier was planned to be a low cost one, a difficult position to take if fares increase. It almost appears that the airline believes higher fuel costs will benefit the industry.
David Utter is a staff writer for Murdok covering technology and business. Email him here.
