UAL In Talks With America West

The parent of United Airlines says it's interested in acquiring rival America West Airlines in a deal that could further heat up recent consolidation and alliance activity in the airline industry.

The nation's largest carrier, United Airlines said Wednesday night in a statement it had expressed "an interest in a possible acquisition of America West." Company spokesman Andrew Plews declined to elaborate on the progress of the talks.

America West Holdings Corp., the parent of America West, issued a separate statement late Wednesday saying it has been contacted by a number of airlines expressing interest in a possible deal, ranging from a strategic alliance to a merger or similar business combination.

America West did not identify the airlines and said it would have no further comment on the possible discussions. A spokesman at America West declined to offer additional comment.

America West's stock price rose 3 13/16 in afternoon trading Thursday on the New York Stock Exchange to 22 11/16 a share, while UAL's stock fell 15/16 to 60 1/4 a share.

Separately, UAL reported its earnings for the fourth quarter fell 18 percent to $1.52 a share, from $1.74 a year ago. Analysts had pegged earnings for the period at $1.45.

UAL blamed the drop on declining air travel in Asia and cheaper fares.

The company was expected to earn $1.45 a share, according to the average estimate of analysts surveyed by First Call Corp. Additionally, Wall Street has been chopping projections and ratings on airline stocks amid a general profit slump in the industry.

Some analysts were skeptical United would be able to complete a deal.

"The positive is that United is not that big in the Southwest, and this deal would give them access to a lot more planes to expand their entire domestic hub apparatus," said Raymond Neidl at Furman Selz. "But (United) must get approval from their union work force, the Justice Department and one of their competitors. I would say those are some formidable hurdles to overcome."

An investment firm, TPG Inc., holds a 49 percent stake in America West, while Continental, the nation's fifth-largest airline, owns 8.3 percent and has first rights to an America West acquisition.

United's pilots and machinists could nix the deal since they and other employees control a majority interest in the company and have seats on the board. America West has been plagued by labor unrest, first with its mechanics and currently with its flight attendants' union.

United pilots also could become concerned about lost jobs to America West's lower-paid pilots. A spokesman for the pilots union did not immediately return calls seeking comment.

The combination would likely face Justice Department scrutiny. Last October, the Justice Department filed a lawsuit over the planned purchase by Northwest, the nation's fourth-largest airline, of a controlling stake in No. 5 Continental, saying i would reduce competition, raise prices for travelers and lower the quality of service.

America West, founded in 1983, has 111 aircraft, 12,000 employees and hubs at its base in Phoenix as well as Las Vegas and Columbus, Ohio. It flies to more than 90 cities in the United States, Mexico and Canada. The airline emerged resurgent from a bankruptcy filing in 1994 and in recent years has cultivated business travelers, who pay more for tickets.

United Airlines, based in Elk Grove Village, Ill., serves more than 150 destinations in the U.S. and another 29 worldwide. Along with Chicago, it has hubs in Denver, London, San Francisco, Tokyo, and Washington, DC.

A United-America West pairing would come as the nation's largest airlines are vying to achieve market dominance with strategic partnerships, alliances and purchases of competitors.

United is strongest in the Midwest and West, and its possible acquisition of a fast-growing low-cost carrier such as America West could serve as a competitive blow to American, Delta and Southwest airlines.

The move also is an apparent response to American's recent moves to bolster its California traffic against United's dominant low-cost Shuttle by United service.