United proposes buying US Airways
James Goodwin, Chairman & CEO, UAL, left, and Stephen Wolf, Chairman of US Airways Group, announce their planned merger Wednesday
What does that mean for fliers?
(CNN) -- United Airlines announced plans Wednesday to buy US Airways for $11.6 billion, a move that would combine the world's No. 1 and No. 10 carriers and create an air giant that would dominate airports coast to coast.
The proposal concerns some industry analysts and travelers, who fear that such a large airline would control pricing and competition.
If the deal goes through, it would give United a bigger presence along the East Coast. The airline, which flies mostly east-west routes has major hubs in Chicago, Denver, Los Angeles and San Francisco.
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US Airways is primarily a north-south carrier, with hubs in Pittsburgh, Philadelphia and Charlotte, North Carolina.
United officials say a larger, revised airline would be a plus for East Coast travelers.
"The addition of US Airways will greatly improve United's
ability to serve customers in the East and to open its worldwide
network to them," said James Goodwin, chairman of UAL, United's parent company.
Fare freeze, frequent fliers
Others are skeptical. They're worried the new, combined airline could potentially suffocate competition in the hub cities now served by US Airways, pushing smaller, low-cost airlines out of business. That would leave the merged airline free to set higher fares, they say.
In response to those concerns, United has promised to freeze fares for at least two years. However, it reserves the right to adjust rates if fuel prices and inflation rise, United officials said.
To relieve competition concerns, the airline also said it would sell the bulk of its operations at Washington's Reagan National Airport to Robert L. Johnson, the chief of Black Entertainment Television. Johnson has said he would start his own carrier, DC Air.
United pledged to keep the US Airways Shuttle, which makes flights between Washington, New York and Boston.
Responding to frequent fliers' concerns, the airline said it would allow US Airways customers to use their frequent-flier points in United's Mileage Plus program. Since United has a reciprocal points agreement with 18 other airlines -- Delta Air Lines, Air Canada and Lufthansa among them -- US Airways clients also could use their points on those carriers, United officials noted.
The agreement would allow United to offer 64 new daily nonstop domestic flights and 29 overseas flights, said the carrier. It also might give the airline more resources to improve customer service, United officials said.
Belaboring the issue
The proposal is hardly guaranteed. Federal regulators must approve the deal as well as United's employees, who own 55 percent of the airline.
The plan also would affect US Airways workers, who would become United employees. All employees below management level would reportedly be guaranteed work.
Nor would this be the first time a United-US Airways deal was shot down. In 1995, United's pilot lobby thwarted an identical proposal, and is expressing strong concerns over this second plan.
"I am deeply disappointed that the company would enter into
a transaction of this magnitude without reaching full agreement
with the United pilot group on all issues," said Rick Dubinsky,
chairman of the Air Line Pilots Association, the master executive
council at United.
Some airline experts doubt if the plan ever will leave the ground. "The hurdles are so many (that) I don't think they can even count them right now," said Michael Miller of Aviation Daily.
But Julius Maldutis, an analyst with New York-based CIBC World Markets Corp., has a more optimistic view. The deal likely will spur other airlines to team up, he said.
"This is going to trigger a major realignment in the airline industry," he said.
CNN's Bill Hemmer andReuters contributed to this report.
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United to buy US Airways
May 24, 2000
CIBC World Markets Corp.
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