US Airways is reviewing its future options in the face of mounting scepticism, underscored by Moody's Investor Service downgrading its rating of both airlines, that the long-awaited proposed merger with United Airlines will secure US Department of Justice (DoJ) approval.
More than a year on from when United first proposed its $12.3 billion take-over plan, the deal appears no closer to regulatory approval. US Airways has since slipped further into the red, losing $171 million in the first quarter, while its share price has slumped to $24 per share compared to the $60 originally tabled by United.
Moody's downgrading is due to US Airways' worsening operating performance and the financial stress a debt-financed take-over would impose on United. Moody's believes the merger would not be approved "under current terms".
Despite US Airways' public claims to the contrary, it is understood from airline sources that a fall-back plan is being formulated to restructure the carrier if the deal dies.
This includes continued rationalisation of the airline's varied fleet of narrowbodies around Airbus A320/A321s, forging relationships with new partners in Europe and Asia, and opening services to new international markets, such as Latin America.
The carrier is retiring its final seven McDonnell Douglas DC-9s by year-end and accelerating the disposal of 31 Boeing MD-80s to next year. This leaves 40 Fokker 100s and 34 Boeing 757s, which are earmarked for sale to American Airlines if the merger is approved, with 43 737-200s and 139-300/400s left to dispose of.
Cost-cutting options include the sale of one of US Airways' three US hubs, with Charlotte regarded as the most attractive, and continuing with the sale of its three wholly-owned regional subsidiaries, Allegheny, Piedmont and PSA, to Atlantic Coast Airlines, suggest sources.
Source: Flight International
