National Press Club

US Airways chief executive says merger with American would create world's ‘greatest airline'

July 18, 2012 | By Bill Miller |

US Airways chairman and chief executive Douglas Parker

US Airways chairman and chief executive Douglas Parker

Photo/Image: Noel St. John

The wave of consolidation in the airline industry has benefitted customers, employees and communties – and that would be particularly true of a proposed merger of US Airways and American Airlines when American comes out of its bankruptcy, said Douglas Parker, chairman and CEO of US Airways, at a National Press Club luncheon July 18.

Even though bankruptcy can provide signficant financial advantages, it “cannot fix a revenue problem” like American has today, said Parker, the industry’s leading advocate of consolidation who has been publicly campaigning for a US Airways-American linkup for months.

Specifically, Parker pointed out, American’s revenue problem stems from a route system that focuses on five large cities rather than a comprehensive network.

“American’s network weakness and consequent revenue challenges can only be fixed through a merger -- and only through a merger with US Airways,” he said.

A former executive at American who has led US Airways since its merger with America West in 2005, Parker said that a US Airways-American marriage would be “extremely complementary” with “very little overlap.”

US Airways, he noted, has a strong East Coast presence, which American, despite its five major hubs, lacks.

A US Airways-American combination would create “the greatest airline in the world,” he said.

The possible merger of the two carriers has raised eyebrows among analysts because it is rare that a healthy airline seeks a merger with a bankrupt one.

His airline is producing record revenues and stock yields and is projecting a very strong quarter and full year, Parker said. The company can stand on its own.

“But just because we’re doing well independently and have a model that works well, that doesn’t mean we shouldn’t work to make the model even stronger,” Parker said.

The merger possibility gained momentum in April when three major American unions -- representatives of which sat the the luncheon speaker’s table -- announced support.

Last week American chief executive Tom Horton, who previously had rebuffed the merger, told employees that American’s progress in its bankruptcy proceedings now makes it sensible for the carrier to consider a merger.

Parker cited the benefits of mergers in recent years by United and Continental, Delta and Northwest, Southwest and AirTran, and America West and US Airways.

"All four combined airlines provide better networks and are now profitable,” he said. “By combining complementary networks to provide more attractive and efficient servuice, mergers have led to increased traffic, cost reductions and vigorous competition.”

Asked if the industry consolidation might lead to increased ticket prices, he predicted that the impact would be “neither postive nor negative,” but that it would be “good for competition” for a third large airline combination to compete with the other two.

As for the impact on employees, he said that the combined 100,000 employees of the two carriers (American is the country's third largest airline, US Airways is fifth) would benefit by “working for the best airline.”