Airlines merged? Not exactly

Combining US Airways, America West routes, operations is taking time

How long the new US Airways stays aloft may depend on passengers such as Rick Lee.

The Birmingham, Ala., security company owner chose US Airways for a business trip to the Triangle this week because the fare was $40 cheaper than Southwest's. Delays turned what should have been a half-day trip into a two-day marathon. Still, Lee said he would consider the airline for his next trip.

"The staff was nice, the pilots were nice, the flight attendants were nice," said Lee, who arrived at Raleigh-Durham International Airport on Wednesday after an unplanned night in Charlotte.

Although US Airways' merger with America West was announced last spring, the complex job of combining two geographically distinct route systems remains mostly undone. Unions with different cultures haven't merged, and the airline still has separate reservations systems and frequent-flier programs.

Steven Lott, business editor of Aviation Daily, flew on the airline last week to see how things were going. It wasn't exactly smooth.

"I tried to use upgrades on an America West flight with US Airways frequent-flier miles, and they looked at me like I had three eyes," Lott said. "You can't check in on an America West flight on a US Airways kiosk and vice versa. There still seems to be quite a bit of confusion."

But if other passengers react as Lee did and the fares stay low, the airline has a chance at surviving long enough to iron the kinks out -- a process expected to last into 2007.

Although there are no deadlines for the merger to be completed, the clock is ticking to achieve the synergies -- and savings -- that brought the carriers together in the first place.

Some aviation experts say the company is better-positioned for survival than its competitors. It has trimmed its fleet and eliminated some duplicate services and jobs. Most recently, 323 employees in Winston-Salem received notices they were being laid off Monday.

Still, employee morale -- at a low during US Airways' two pre-merger bankruptcies -- has gone up.

"They're doing many of the right things ... and the dangers they face are beyond their control in many cases, including the cost of fuel and the economy in general," said David Field, Americas editor for Airline Business magazine, a trade publication in London.

Executives anticipated $600 million in operating-cost savings and revenue synergies when the merger was announced in May. Today, the carrier, based in Tempe, Ariz., is still waiting for its first quarterly profit.

Fourth-quarter losses -- for the first period since the carriers merged -- were $261 million.

Nor has other news been good.

Last month, there was violence at a Philadelphia hotel between members and officials of unions vying to represent the combined airline's fleet service workers; 22 employees were fired. And US Airways warned in a Securities Exchange Commission filing that its merger faces "significant challenges."

According to the filing, "the anticipated benefits may take longer to realize than expected or may not be realized at all."

"There isn't any integration at this point," said RDU Director John Brantley. "US Airways' employees are flying the black ones and America West guys are flying the multi-colored ones. But the day of reckoning is close at hand."

But as the industry tries to pull out of its financial tailspin, US Airways has a low-cost advantage over some competitors, partly because of wage and benefit cuts accepted by employees before the merger.

Its costs per available seat mile -- a measure of labor costs -- now are lower than American and Delta. In the fourth quarter, US Airways' cost was 10.6 cents, compared with 11.57 cents for American, and 11.84 cents for Delta. Southwest, at 8.39 cents, and Continental Airlines, at 10.5 cents, were both lower.