Thursday, April 08, 2010

OmniCorp Watch: United Airlines & US Airways May Merge

Here we go:

The negotiations represent the latest efforts to consolidate the struggling airline industry, which lost $60 billion over the last decade as fuel costs soared and the number of travelers fell. Both companies have been vocal in calling for greater partnerships.

Of the major airlines, only the low-cost carrier Southwest Airlines turned a profit last year. And analysts have said that despite the steep cuts in capacity by all the airlines in the last couple of years, there are still too many airlines chasing too few travelers. A combination of United and US Airways could help both return to profit faster than they could going it alone.

But mergers in the airline industry have been difficult to pull off, in part because complex labor contracts can offset the promised cost savings. The latest combination, involving Delta Air Lines and Northwest Airlines, creating the nation’s largest carrier, took nearly two years to complete. One reason that merger succeeded was that Delta and Northwest negotiated a seniority plan and a new collective bargaining agreement with the pilots, enabling the two companies to integrate their operations faster and more smoothly.

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