US Airways Group Inc. and America West Holdings Corp. could announce their merger as early as this week, sources familiar with the deal said Sunday.
US Airways and America West, which began talking about a deal more than a year ago, are in the final stages of their plans to merge to become one of the nation's largest low-cost carriers. A source said both sides continue to firm up their plans and the talks remained "fluid."
If the two airlines reach a merger agreement, the combined airline is likely to keep the name US Airways, which is a more well-known brand across the county.
To reach agreement on a deal, US Airways and America West were trying to raise $400 million to $700 million, said a source, speaking on condition of anonymity because of the nature of the talks. The airlines were in talks with Air Canada about investing in the deal. Air Canada, which is strong internationally, would be expected to handle international flights, while the US Airways and America West would handle domestic flights.
America West is trying to avoid investing billions of dollars in a takeover of US Airways. Instead, the two airlines are trying to form a strategic merger, with a possible holding company serving as the owner of the combined airline.
US Airways, based in Arlington, Va., is the nation's seventh-largest carrier. It is the primary carrier at Pittsburgh International Airport.
The airline has been struggling to transform itself into a hybrid carrier with budget-airline costs while still offering traditional airline amenities, such as first-class cabins and international routes. US Airways, which has 28,000 workers, has slashed more than $1 billion in labor costs since filing for Chapter 11 bankruptcy protection in September, but its costs are still higher than other budget airlines, including America West, Southwest Airlines Co. and JetBlue Airways Corp.
US Airways reported a loss of $611 million in 2004 and revenue of $7.12 billion. The recent Chapter 11 filing was its second in less than two years.
An investment partnership could result in increased feeder traffic between the airlines. America West, the nation's eighth-largest carrier, is strong in Phoenix and Las Vegas and could benefit by securing passenger feeder lines from the East, where US Airways is strongest and has hub airports in Philadelphia and Charlotte.
America West, founded in 1983, has 13,000 employees, and primarily serves destinations in the western United States. During the past three years, the airline has transformed itself into a low-cost carrier and it was one of the first airlines to implement buy-on-board meal service.
