By Julie Johnsson
| US Airways is no longer interested in merging with United Airlines, and
it wants the world to know.
In a highly unusual move, US Airways announced Thursday that its board
had decided to end talks with the Chicago-based carrier. The statement
by Doug Parker, US Airways’ chairman and CEO, signaled the anger and
frustration that executives of the Phoenix-based carrier felt when
United put their discussions on hold last week, days ahead of a planned
merger announcement, to focus on a potential deal with Continental
Airlines, say people close to the carrier.
“I am sure some ‘industry experts’ will suggest that US Airways will be strategically harmed if United now chooses to merge with Continental,” Parker said in an April 22 letter to US Airways employees. “They will be wrong…Should our competitors choose to merge and help create a more stable airline industry, our independent airline will only become stronger.”
The rupture between United and US Airways doesn’t mean that they wouldn’t return to the negotiating table at some point in the future, sources said.
But Thursday’s announcement positions US Airways, the nation’s sixth-largest carrier, as a potential “wild card” if other U.S. carriers like American Airlines, AirTran Airways and Southwest Airlines decide to explore their own deal-making possibilities, sources said.
The schism likely increases the pressure on United CEO Glenn Tilton to wrap up a deal with Continental, with whom United has explored merging several times during his nearly seven-year tenure.
That’s because United and US Airways were close to completing a deal to create the nation’s second-largest merger when news of the talks leaked to the New York Times, April 7, say people with direct knowledge of the discussions.
Talks had progressed much farther than in 2008, the last time that United and US Airways had mulled a tie-up, and the carriers were discussing the timing of their merger announcement, sources told the Tribune.
Continental Airlines, which learned of the discussions through media reports, had been hesitant to get drawn into potentially distracting merger discussions, preferring instead to focus on the joint ventures it was forming to share flying with United over the Atlantic and the Pacific.
But not wanting to be left a distant fourth in a rapidly consolidating industry, Continental decided last week to resume talks with United that it had abandoned in April 2008.
US Airways executives were furious to find themselves jilted after pouring much time and money into a potential deal, said a source close to the carrier, feeling that they had been “played” by United CEO Glenn Tilton.
Analysts consider Continental to be the preferred merger partner for United. The tie-up would create the world’s largest airline, is likelier to gain the support of the carriers’ unions as well as blessings from antitrust regulators.
US Airways, however, would have enabled United to bulk up its domestic network, particularly along the eastern seaboard. The merger combination would have benefited from the increased global reach that United expects to gain from its joint ventures with Continental.
Analysts expect United to move quickly to try and seal the deal with Continental, even though it loses some leverage now that US Airways isn’t waiting in the wings.
“We expected United to make a go/no-go decision on M&A at some point over the next two weeks,” said analyst Hunter Keay of Stifel Nicolaus in a research report Thursday.
