America West, US Airways begin flying under one banner

Tuesday, September 27th 2005, 7:29 pm

By: News On 6

TEMPE, Ariz. (AP) _ America West and US Airways finalized their deal to become the nation's fifth-largest domestic carrier Tuesday, but the company still faces big challenges in the financially unstable airline industry.

First among them is not to stumble and drive away customers.

Next is overcoming a big increase in the cost of jet fuel, one of the biggest operational costs an airline faces.

Other hurdles include merging their reservations systems, then setting out to write a combined policies, procedures and operations manual that aviation authorities will approve. That process alone could take two to three years.

Still, CEO Doug Parker was upbeat, ringing the bell at the New York Stock Exchange to kick off trading of the combined companies' stock, which carries the LCC symbol.

``Today we start a new chapter in aviation history,'' Parker said in a news release.

Although the airlines can now technically operate as one carrier bearing the US Airways name, passengers will have to continue to book directly with each airline as they did before the deal closed.

The airlines will operate separate Web sites until their reservations systems are fully merged, anticipated sometime in the first quarter of next year.

US Airways planes and America West jets will be operated as separate business units until the Federal Aviation Administration approves the company's combined operation manual, said C.A. Howlett, senior vice president of public affairs for America West.

Beginning early next year, America West planes will begin sporting their new US Airways paint schemes.

The company will operate 411 aircraft at first, but that number will decrease by 51 as the company returns planes to leaseholders.

The return will help the airline cut costs, and raise profits, said Howlett and airline spokesman Phil Gee.

That's not only because of savings in aircraft lease payments and operational costs. The company hopes it can achieve substantial payroll savings when older employees _ mostly US Airways crews _ leave the company.

``U.S. Airways has a relatively senior work force and attrition in the airline industry is fairly common,'' Gee said. He wouldn't disclose how many of the current 38,000 employees the airline hopes to shed.

The company is also hoping the decreased number of available seats will give it more ``market power'' _ and the ability to raise fares, Howlett said.

At least one analyst who follows America West was skeptical.

``They don't have a lot of market power _ they're still small as compared to other airlines,'' said Raymond Neidl, an analyst for Calyon Securities.

US Airways also has to compete head to head in many markets with low-cost leader Southwest Airlines Inc. The goal of the deal was to form a stronger airline that would compete better with lower-cost rivals such as Southwest and JetBlue Airways Corp.

They've been successful operating next to Southwest for years, Neidl said, but raising fares is hard for any airline.

``Everybody's hoping for it. I'll believe it when I see it,'' he said.

Still, Neidl said the company's financial forecasts seem realistic, despite rising fuel costs that have pinched whatever profits large airlines may be able to pocket.

``The big challenge upfront is going to be merging the two companies,'' Neidl said. ``They're doing it in stages, which will help, but you have to watch out because you don't want to drive away customers.''

At the Tempe headquarters of the company Tuesday, a celebration to unveil the new US Airways banner on the former America West headquarters building drew about 100 employees and some local officials.

``About 24 years ago when this airline was first begun there were a lot of chuckles in the industry, in the city and in the Valley (metro area),'' said Phoenix Mayor Phil Gordon. ``Nobody's chuckling now.''

At Sky Harbor International Airport, female reservations clerks at both airlines' ticket counters donned wedding veils. A wedding featuring a bride and groom was even staged in a busy America West concourse, to the amusement of passengers.

Although the company will take on the US Airways name, it will be run by America West management and based in Arizona.

That's touched the heartstrings of traveler Monica McGrath of Philadelphia, who was heading home on US Airways on Tuesday.

``I've been flying US Air for years,'' said McGrath, a consultant and adjunct professor at the University of Pennsylvania's Wharton School of business.

``But US Air's been a mess. I think the employees in the past couple of years have been disenfranchised and disillusioned a little bit,'' McGrath said. ``Maybe this will help.''