Merger madness: US Airways' sobering withdrawal

'Coincidence? You be the judge', the announcer would boom in conspiratorial tones on the radio ortelevision programs heralding the latest unidentified flying objected or other phenomenon.

Two flash headlines from the other day brought this to mind: 'US Airways Ordered to Stop Serving Alcoholic Drinks' and US Airways Withdraws Bid for Delta'. Not to put too fine a point on it, but the bosses at US Airways seemed to have sobered up, and quickly, after they ran into roadblocks from the Delta creditors who were the deciders of the Airways $10 billion bid for the number three Delta.

A "disappointed" US Airways Chairman and Chief Executive Officer Doug Parker said, "We would have created a better and more financially stable airline that offered more choice to consumers and increased job security to its employees".

Parker was much more mellow about the alcohol problem; it seems state liquor authorities in New Mexico found that the airline did not have a licence to serve booze there, and until it gets said state permission, the carrier may not serve or sell beer, wine, or hard stuff to people on any of its flights that take off or land there.

But seriously, folks, as the announcer might say, does this mean an end to consolidation? Some observers think that the legacy carriers will just breathe a sigh of relief and go back to their restructurings now that they don't have to pursue merger negotiations begun largely as defence manoeuvres in response to 'Deltaways', as some dubbed the hypothetical US Airways/Delta combination.

Meanwhile the ever-reliable Ray Neidl of Calyon Securities says big deals are probably off for the next six months but after that "consolidation will occur". Neidl notes that Parker and the US Airways management team have clearly established themselves as credible with the financial powers-that-be and would probably be an acquirer.

But Parker's entire rationale for going after Delta was that it was easier to do a deal within the context of bankruptcy, so one has to ask if US Airways will abandon this strategy. On the other hand, they're making so much money at US Airways that they can afford champagne when other carriers are still on a beer budget.

Stay tuned.