Experts: Too Many Carriers in Air Industry

Merger Boosts Bankrupt US Airways, but Industry Still Has Too Much Capacity, Analysts Says

By MATTHEW BARAKAT
The Associated Press

McLEAN, Va. May 22, 2005  Bankrupt US Airways may have saved itself by agreeing to merge with America West Airlines, but it does little to address what many in the industry believe is a fundamental problem: too many carriers offering too many flights.

When US Airways Group Inc. made its second trip into bankruptcy in September, some competitors hoped and many experts believed the airline would never emerge, allowing competitors to pick the bones from the carcass of the nation’s seventh largest airline.

Southwest Airlines Inc., for instance, made no secret of its desire for some of US Airways’ gates at its Philadelphia hub, where the two airlines compete directly. Other airlines eyed US Airways’ slots at airports in New York, Washington and Boston and some of its profitable Caribbean routes, but nobody wanted to acquire the dysfunctional airline as a whole.

Now, even though many in the industry believe the collapse of a carrier like US Airways would be the best remedy for excess capacity, the planned merger with America West calls for just a slight trim of the US Airways fleet.

“The survival of US Airways could be detrimental to the industry as a whole” because it props up a carrier that just months ago had been on the brink of total collapse, said business professor Anthony Sabino of St. John’s University in New York .

“If I’m the CEO of Delta” I would have loved to see the elimination of a carrier like US Airways,” said Sabino, an industry expert.

The two airlines have a combined fleet of about 400 jets, and the merger agreement calls for returning 59 jets, or about 15 percent of the fleet, to their lessor. Most of those 59 jets would have been trimmed from the US Airways fleet anyway as part of its bankruptcy restructuring, US Airways chief executive Bruce Lakefield said Thursday.

While eliminating 15 percent of the combined fleet of the nation’s seventh and eighth largest carriers may sound like a drop in the bucket, industry executives seem appreciative of any capacity reduction.

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