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US Airways may seek an ally
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April 6, 1998: 12:41 p.m. ET
The no. 6 carrier said to be sounding out United, American for an alliance
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NEW YORK (CNNfn) - The airline industry is beginning to sound suspiciously like Joan Rivers these days: Everyone just wants to talk.
In the latest reported confab in the clouds, US Airways Group Inc. is said to be courting UAL Corp.'s United Airlines and AMR Corp.'s American Airlines, the nation's number one and two carriers, for a possible alliance that would shift the balance of air traffic on the East Coast.
The talks are preliminary and have not evolved to the point where an outright merger has been broached, the Wall Street Journal reported.
But the very fact the talks may be taking place appears to underscore the newfound dynamic in the industry towards ad hoc partnerships, as opposed to formal mergers. The arrangements may permit carriers to expand their passenger share and geographical reach by sharing one another's flight codes and frequent flyer plans.
That was the case in the so-called "virtual merger" unveiled in January between Northwest Airlines, the nation's number 4 airline, and Continental Airlines, the number 5 carrier. Under the alliance, the airlines retain their distinct corporate identities, along with separate management, fleets and work forces.
In many respects, the players believed to be involved in the latest talks are executing the corporate equivalent of a pre-preemptive strike.
In addition to the purported talks between US Airways and American and Delta, the Journal reported that United also was in early alliance discussions with Delta, the third-largest national airline.
Such an alliance would allow the airlines to swap services and expertise, creating a powerhouse boasting about 36 percent of domestic seat capacity.
American in the past has publicly stated it would refrain from actively pursuing an alliance of its own. But it apparently felt compelled to enter the latest talks with US Airways, according to the Journal, out of fear of a United-Delta partnership, or a United-American alliance.
Shares of US Airways Group [U] rose 1-5/8 in mid-morning trading Monday on the New York Stock Exchange to 74-5/8. UAL Corp. (UAL) stock declined 5/16 to 95-5/16, while AMR Corp. (AMR) shares dipped 5/16 to 143-5/16.
US Airways spokesman Rick Weintraub said his company does not comment on rumor or speculation. He also refused to confirm that the airline is seeking an alliance partner. UAL officials also declined comment. American Airlines officials had not responded to telephone calls at the time this report was filed.
After years of steep losses in the early 1990s, US Airways has staged a comeback in the past few years and today is the nation's number six airline. Its strength is perceived to lie in its highly trafficked Eastern corridor routes, traffic that Chicago-based United and Fort Worth, Texas-based American would clearly love to share.
Washington's watchdogs are on alert
Nonetheless, an alliance in any form is bound to draw intense scrutiny from Washington, where aviation watchdogs have been cranking up the regulatory machinery in recent months.
Perhaps the biggest potential stumbling block is the U.S. Justice Department. Justice officials are in the midst of a probe to determine whether the nation's four largest air carriers -- Northwest, American, Delta and United -- have tried to muscle smaller carriers out of the nation's busiest airports.
In early February, the department subpoenaed several smaller carriers to find out how the larger airlines reacted to their entry into airports in Chicago, Dallas, Denver, Detroit, Minneapolis, Atlanta and New York.
The carriers also are being asked which, if any, routes they've been forced to abandon due to price cutting, or which others they haven't even attempted to fly.
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