US Airways Group Inc. CEO Doug Parker on Wednesday
renewed his call for further consolidation of the airline industry, saying domestic carriers need to contract if the business is to stay viable and make money in downturns.
Parker, speaking at the company's annual meeting in New York, praised the 2008 merger between Delta Air Lines Inc. and Northwest Airlines Corp. but noted that the combined carrier, now the nation's largest, has just 25% of the U.S. market, leaving ample room for further dealmaking.
The comments likely come as little surprise to those familiar with Parker, a refreshingly blunt CEO who has long been an advocate of consolidation in an industry where most shy away due to labor and regulatory concerns. Parker as CEO of America West Airlines Inc. in 2005 orchestrated a deal to acquire the larger US Airways out of bankruptcy and take its name, a deal that secured what was otherwise an uncertain future for both carriers. He attempted to repeat the feat in 2006 when he made a run at the larger Delta when it was in Chapter 11, and last year held talks with United Airlines Inc. parent UAL Corp.
But despite the comments, it seems unlikely that there will be any dealmaking between major airlines in the near future. UAL, which has struggled with labor issues since emerging from its own bankruptcy in 2006, is still the most likely partner but seems to prefer a marriage with Continental Airlines Inc. In 2008 Continental rebuffed merger overtures with UAL but agreed to join United's Star Alliance. Most in the industry believe the two sides will focus on making the alliance work before engaging in any future talks.
With United and Continental growing closer US Airways could make a good mate with AMR Corp.'s American Airlines Inc., which in a matter of a few years has gone from the nation's largest air carrier to third behind Delta and an aligned United/Continental. American could theoretically add US Air's West Coast operation out of Phoenix and extract savings from the two airlines' overlapping Northeast strongholds, and perhaps in Parker find a successor for current CEO Gerard J. Arpey.
But those overlapping strongholds in the East seem likely to raise considerable antitrust attention, and both American and US Airways have ongoing labor issues that would preferably be resolved before moving on to deal talk. So even if Parker is correct and the industry could benefit from further consolidation, chances are he will be making the same speech at next year's annual meeting as well. --
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
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