United and US Airways merger could create one of the world's biggest airlines
United Airlines parent UAL Corp. and US Airways Group Inc. reportedly are in talks on a potential merger that would create one of the biggest carriers in the world and at Logan International Airport.
The New York Times reported yesterday evening that the two airlines were in merger talks, but no announcement of a deal is expected for at least several weeks, the newspaper said, citing unidentified people briefed on the matter. The talks may still collapse, according to the Times.
Combining United, the third-largest US carrier, with No. 6 US Airways would create one of the world’s largest airlines, with an extensive route network. United has hubs in Chicago, Denver, San Francisco, and at Washington Dulles International Airport, while US Airways has hubs in Philadelphia, Phoenix, and Charlotte, N.C.
In Boston, US Airways and United Airlines are the fourth and fifth biggest carriers, respectively, in terms of passengers, with a combined 25 percent of the market share at Logan. A combination of the two airlines could unseat JetBlue, which is currently the top carrier at Logan, with nearly 18 percent of the market share.
Even with US Airways' plans to shut down its Boston crew base next month and reduce its flights from Logan to the Caribbean, the merger would probably make the combined airline the No. 1 player at Logan, said Daniel Kasper, head of the transportation practice at the Cambridge office of LECG, an economic and financial consulting firm.
US Airways and United don't have many overlapping routes out of Boston, which means there probably wouldn't be a lot of routes cut, or prices raised, if the two merged. United flies mainly west from Logan -- to Chicago, Denver, San Francisco, and Los Angeles, as well as to Washington, D.C. -- and US Airways flies mostly along the East Coast -- to Philadelphia, New York, Washington, D.C., and Charlotte, as well as to Phoenix and the Caribbean.
A route that could face cuts is Boston-to-Washington, D.C., which might affect business travelers. But a United/US Airways combined carrier wouldn't want to give up much ground at Logan, particularly given all the gains low-cost carriers have made recently. "They would very much like to be able to defend their turf a little bit more effectively," Kasper said.
Massachusetts Port Authority, which runs Logan, and James Olson, a US Airways spokesman, also declined to comment.
“We don’t comment on rumors or speculation,” said Jean Medina, a spokeswoman for United. “We’ve been consistent on our position on consolidation generally for several years, and that position is well known."
Consolidation is the next frontier for US airlines, which have been battered for much of the past decade by rising fuel costs and more recently by the recession. Carriers have sought to cut costs by doing things such as reducing capacity, while at the same time trying to generate more revenue, including charging for everything from baggage to meals.
United Chief Executive Officer Glenn Tilton and US Airways CEO Doug Parker have both championed for industry consolidation. Tilton said in a Jan. 21 interview that the path toward industry mergers was being smoothed by global alliances, while Tempe, Arizona-based US Airways made a hostile bid for Delta in 2006.
This isn't the first time the two airlines have considered merging. In 2000, Chicago-based United and US Airways announced a $4.3 billion deal, only to withdraw. And in 2008, the two carriers held talks again on a merger before abandoning the effort, less than two months after Delta Air Lines Inc. agreed to acquire Northwest Airlines Corp., making it the world's biggest airline. The previous talks between United and US Airways were held up because of the complexity of putting together the various union contracts covering each airlines' employees, as well as sorting out which union would represent workers and how to account for their seniority.