- The Washington Times - Tuesday, September 13, 2005

US Airways Group Inc. yesterday took a big step toward emerging from bankruptcy when shareholders at America West approved combining the two airlines.

Shareholders at America West overwhelmingly approved the merger, with more than 95 percent agreeing to the deal during voting at the company’s headquarters in Tempe, Ariz.

The vote is a “ringing endorsement” of the proposed company’s business plan, said Douglas Parker, who is chief executive of America West and would serve as chief executive of the combined company.

The combination of US Airways and America West would create the nation’s sixth-largest airline and a low-cost carrier with a broad geographic reach.

Perhaps more important for US Airways, yesterday’s vote made it more likely that U.S. Bankruptcy Court Judge Stephen Mitchell would approve its reorganization plan, analysts said.

“I expect court approval,” said Ray Neidl, an airline industry analyst for Calyon Securities Inc., in New York.

Judge Mitchell’s hearing on US Airways’ reorganization plan, scheduled for tomorrow, is the last hurdle the company must clear before a merger can take effect and its second trip into bankruptcy can end.

The merger is the linchpin of the reorganization. It also may make the difference between US Airways’ failure or success.

“I think most of us expected US Airways to disappear,” said Michael Roach, an airline analyst and co-founder of America West, which began flying in 1983.

But then America West came along, he said. US Airways and America West began merger discussions in January, then announced their plan to combine operations May 19.

The new company will be funded with $1.5 billion in new equity from companies including Airbus SAS, Air Canada parent ACE Aviation Holdings Inc. and a group led by Air Wisconsin Airlines Corp.

US Airways’ unsecured creditors and the Air Transportation Stabilization Board, which has backed more than $1 billion in loans for the two airlines, have approved the merger.

If Judge Mitchell approves US Airways’ plan tomorrow, the first official day of the merged company would be Sept. 27, America West spokesman Philip Gee said.

The airlines are promoting Sept. 27 as “Day One.”

The combined company will operate with the US Airways name, but it will move to America West’s corporate headquarters in Arizona.

Immediate changes will be modest. US Airways and America West operate jointly in 38 cities, and it will take months before the airlines complete work to change logos and rebrand themselves in each market.

While work is done to present the airline as a single company, flight operations must remain separate until the Federal Aviation Administration issues the combined company a single operating certificate. That could take up to three years, Mr. Gee said.

Even if Judge Mitchell approves the reorganization plan tomorrow, the airlines still face significant obstacles, industry analyst Darryl Jenkins said.

Rising jet-fuel costs will impose a heavy financial burden, and determining seniority among pilots, flight attendants and mechanics will take years, he said.

“There are going to be problems,” Mr. Jenkins said.

America West flight attendants demonstrated outside the airline’s headquarters yesterday to voice their dissatisfaction with the slow progress of contract talks. The union this week asked a federal mediator to oversee negotiations with the airline.

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