America West, US Airways in Talks

US Airways and America West Airlines are discussing a merger that could trigger a long-awaited wave of consolidation in the troubled airline industry.

The carriers are in advanced talks with the goal of combining to form a discount airline that could better compete with low-fare king Southwest Airlines Co., according to published reports late Tuesday.

US Airways Chairman David Bronner confirmed the talks in an interview with the Associated Press, but he said no deal had been reached.

A representative of US Airways didn’t return calls seeking comment. America West spokesman Phil Gee declined to comment.

Tempe, Ariz.-based America West is scheduled to report its first-quarter financial results and hold a conference call with analysts today.

A marriage between the two carriers would face a number of hurdles in good part because US Airways is reorganizing under Chapter 11 of the federal Bankruptcy Code.

The federal government, which has provided loan guarantees for both airlines, also would have to sign off on a deal.

US Airways and America West are the nation’s seventh- and eighth-largest airlines, respectively, and together they would supplant Southwest in the No. 6 position.

US Airways’ network is concentrated in the East while America West’s two hubs are in Phoenix and Las Vegas. Locally, America West serves several airports, including Los Angeles International, Bob Hope Airport in Burbank and John Wayne Airport in Orange County, while US Airways serves only LAX.

Both carriers fly to San Diego and San Francisco.

A deal between the airlines “could be the start of a consolidation people have been talking about” for the U.S. industry, said Raymond Neidl, an analyst with investment firm Calyon Securities in New York.

The industry is reeling from more than $30 billion in losses since the Sept. 11, 2001, terrorist attacks. The losses not only reflect a sharp drop in air travel immediately after the attacks, but also soaring prices for jet fuel, widespread fare cutting, an oversupply of seats and, for some older, “legacy” carriers, relatively high operating costs.

The solution, many have argued, is for the airlines to start merging so that the industry is left with fewer but stronger survivors.

But airline mergers are uncommon because they’re notoriously difficult to pull off. One major impediment: melding the two carriers’ employee groups, which often have conflicting seniority requirements and other clashing work rules that raise the merged airline’s costs.

However, both US Airways and America West already have gone through wrenching restructurings and cost-slashing efforts to become more efficient. That could make a marriage easier to accomplish.

Also, “there probably would be very little resistance from government [antitrust] sources, because the two airlines are largely noncompetitive” across their networks, Neidl said.

US Airways and America West also share Terminal 1 at LAX, although neither is a major player at the airport. US Airways was the 12th-largest airline operating at LAX last year with 1.75% of passenger traffic while America West was No. 8 with a 3.1% share.

The other airline in LAX’s Terminal 1 is Southwest.

Based in Arlington, Va., US Airways is the main subsidiary of US Airways Group Inc. The airline has about 1,330 daily departures to nearly 100 cities and 25,100 employees.

US Airways’ major hubs are in Pittsburgh, Philadelphia, Washington and Charlotte, N.C. It also operates a shuttle service between Boston, New York and Washington.

America West is owned by America West Holdings Corp. Founded in 1983, the airline has about 580 daily departures to 95 cities and employs 13,670 people.

US Airways and America West also provide regional airline service -- through US Airways Express and America West Express respectively -- much of which is operated by other, smaller carriers.

A merger would require a lot of cooperation. The Bankruptcy Court judge overseeing US Airways’ reorganization would have to approve the deal, presumably after US Airways’ creditors signed off on the deal.

Approval also would be needed from the Air Transportation Stabilization Board, an agency set up after the 9/11 attacks to help the airline industry.

US Airways last year lost $611 million on revenue of $7.1 billion. America West lost $89 million on revenue of $2.3 billion in 2004.