NEW YORK (CNN/Money) -
Executives at America West Airlines refused to confirm reports of a merger between the low-cost carrier and bankrupt US Airways Wednesday, but said the airline has been in consolidation talks with a number of carriers and outlined why they believe a merger like one with US Air could work.
"We believe consolidation in the industry is inevitable," America West CEO Douglas Parker said in a conference call. " We are in and out of talks with several airlines. If something like this is happening, we want to be forward-thinking about it."
Parker, when asked by an industry analyst why a profitable or nearly profitable airline like America West thought it could buck historical trends and pull off a merger with a bankrupt, money-losing carrier like US Air, said he believed the industry had evolved enough to make such a deal possible.
He cited downward pressure in labor costs, a larger number of bankruptcies resulting in more grounded aircraft and a changed regulatory environment as reasons.
America West (Research) reported a quarterly profit Wednesday that reversed a year-ago loss, yet its stock sank about 7 percent on talk of the merger. The news of merger talks between the carriers was first reported in the Wall Street Journal.
US Airways also refused to confirm reports of the merger, but hinted that something was afoot.
"We have been in discussions with a number of interested parties over the last several months," US Air CEO Bruce Lakefield said in a recorded message to employees on the company's hotline. "But this mornings news coverage has been much more extensive."
The Journal reported that bankrupt US Air is in advanced talks with America West to create a national low-cost carrier that would rival Southwest Airlines (Research) in size.
While the report cautioned that several obstacles remained, including approval from shareholders, unions, creditors and the government, the deal could represent the start of a new round of consolidation in an industry hit by high fuel prices, overcapacity and cut-throat pricing.
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