In a BusinessWeek story today, which can be read HERE, I noticed a paragraph that gives some hint as to who wants to be in charge of the new airline if a merger agreement does come about.  It says:

UAL, based in Chicago, and Tempe, Arizona-based US Airways are discussing an all-stock transaction to combine the companies, with the smaller US Airways being the acquirer, said the people familiar, who asked not to be identified because the talks are private. The merger would help United steer travelers to international flights from US Airways’ domestic routes, said one of the people.

That sounds like US Airways management being the “lead” group in a merger and, more importantly, Doug Parker as CEO.  However, I don’t know where US Airways has the financial capability to be the surviving entity either.  (Note:  Just because US Airways is the surviving entity doesn’t mean that the name United Airlines goes away.  They may well choose to keep that name.)  In addition, where does that leave United President John Tague?  He is arguably the executive who has best managed United and who is arguably the one to succeed Glenn Tilton as CEO. 

Doug Parker and team have done a fairly admirable job in keeping US Airways afloat and viable but they still have unresolved issues with their labor unions at present.  Such a merger would mean 3 different groups of pilots who would have fairly strong ideas on which union should represent them and how much they should be paid.  The AmericaWest/US West group is the minority group at present but could potentially regain some leverage and power if they could agree with the United pilots. I find it hard to believe anyof the 3 groups would agree with another.

If they really wanted to do this, I suspect they’ll have to give up some substantive group of routes and, possibly, equipment to gain approval.  The Washington D.C. area is the trouble point since US Airways has a strong position in Washington, Philadelphia and Charlotte and United has a strong position in Washington as well.  I’ll bet Southwest could be interested in paying for routes into and out of Washington National airport but I’ll also bet that UA/US doesn’t want Southwest having a foothold there either.

None of this makes really good sense.  If this is a real negotiation for a merger, I don’t see it happening without giving up lots of advantage in Washington which hurts the merger potential.  If it is an attempt to bring someone like Continental to the table, I think Continental is smarter than that.  That leaves American Airlines and they just don’t seem to like mergers like that.  They don’t mind acquisitions but mergers aren’t their cup of tea.  However, one could make a case for an AA/US merger that might actually have some benefits similar to the Delta/Northwest merger. 

But I seriously doubt AA’s unions would cooperate with a merger like that.

Some analysts see Continental making a bid.  I don’t.  Merging with United doesn’t give them any advantage they don’t already have and saddles them with labor problems and a fleet that is aging and which doesn’t mix with Continental’s well at all.  People keep pointing to United’s position on Asian routes but I would point out that if Continental had the equipment, they could probably siphon off United’s customers without buying the company.  Coincidentally, Continental has early 787 positions that could allow them to do just that.  I just don’t see Continental going for this.

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