Consumers may benefit from airline merger

PHOENIX — In an industry with a glut of seats, the proposed new airline from a merged US Airways and America West is expected to keep its fares lows and offer travelers a range of new destinations. Consumers are likely to benefit from the combination, analysts say, even if the business model remains a work in progress.

The marriage of the nation's seventh and eighth largest carriers also expects to offer customers access to the Star Alliance, a global consortium of 16 airlines that includes US Airways, UAL Corp.'s United Airlines, Germany's Lufthansa and Air Canada, whose parent company has agreed to invest $75 million in the new airline.

Such alliances are designed to allow mileage earning and accrual on all member airlines, letting them lure and retain customers for worldwide service.

Both struggling carriers say their goal is to create an airline designed to better compete with lower-cost rivals, such as Southwest Airlines Inc. and JetBlue Airways Corp., which have taken market share from major legacy carriers in recent years and have remained profitable despite the industry's prolonged economic downturn.

Backed with $1.5 billion in new capital from a variety of investors, the combined airline will be the nation's No. 6 airline in terms of passenger miles. It will fly under the US Airways name.

Even though the combined airline plans to cut 59 jets from its fleet, analysts say the merger will not dramatically reduce the industry's number of excess seats, thus ensuring continued competition and favorable fares. The companies also say they plan to continue the same cities where they currently fly.

If US Airways, which last year made its second trip into bankruptcy in two years, had been left to liquidate, the market would have fewer seats and airlines would be able to raise ticket prices, said Ray Neidl of Calyon Securities.

Anthony Sabino, a professor at the Peter J. Tobin College of Business at St. John's University and a lawyer with experience in airline bankruptcies, called the merger a "reprieve from a death sentence" for US Airways and a boon for consumers.

"Consumers should exploit this to their advantage," he said, explaining that a US Airways bankruptcy and resulting liquidation would have meant fewer seats and higher consumer costs.

Waiting in the America West ticket line Friday at Phoenix's Sky Harbor International Airport, flier John Karsten of Denver said he doubted consumers would see any changes in service due to the merger, including discounted ticket prices.