US Airways chief executive Doug Parker warned employees on Wednesday that airlines would have to make “dramatic changes” as oil prices rise and the economy sours, though he wouldn’t comment about speculation that his airline is in merger talks with other carriers.
In a letter to employees, Parker mentioned a news report that US Airways was in talks with United Airlines and another that said it would be good partner for American Airlines.
We can’t ignore what’s happening in the world around us. Oil has risen to over US$113 per barrel and Wall Street is anticipating a recession that, if it happens, will lower all airline revenues,” he wrote.
And if Delta Air Lines Inc and Northwest Airlines Corp combined as planned, it would create “a formidable competitor,” he said.
For years, Parker has been a major booster for airline consolidation. His airline, Tempe, Arizona-based US Airways Group Inc was formed in 2005 from America West Airlines and the former, Virginia-based US Airways.
Parker also tried to combine with Delta Air Lines last year, but the carrier’s US$9.8 billion hostile bid failed.
Investors also have pushed consolidation as a way to keep airlines aloft in a volatile economy.
By joining forces, airlines would be in a better position to cut redundant flights, put fewer planes in the sky, and have better control over fares.
“If done properly, [consolidation] could result in a much healthier industry which would be good for our employees, our customers and the communities we serve,” Parker said.
“Rest assured if US Airways chooses to participate in any industry consolidation, we will do so because we believe it is the best interests of our employees and our airline.”
News reports have said that US Airways could be in talks with United and American Airlines. But industry observers disagree about whether those pairings would work.
Michael Boyd, an airline consultant in Colorado, said US Airways has been tainted by operational problems and union fights since its previous combination in 2005.
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