CHARLOTTE, N.C. -- Reports of a possible US Airways merger with United touched off speculation Thursday on how Charlotte would fit in with the massive airline, and whether the federal government would approve a second blockbuster airline merger in two years.
But some US Airways union officials said they are apprehensive about another deal because the 2005 America West-US Airways marriage still isn't complete. Concerns of pilots and flight attendants over salary cuts from a 2002 US Airways bankruptcy is a hurdle to another merger, union officials said.
The pilots from the old US Airways still fly under a different contract than pilots from the old America West.
"It would almost be a double merger," said Scott Theuer, spokesman for the US Airline Pilots Association. He said the merger possibility isn't a surprise after US Airways chief executive Doug Parker talked about it at a March meeting with pilots in Charlotte.
Theuer said there is a nearly decade-old provision for US Airways pilots that calls for their pay to be restored if there is a merger in which there is a "change of control" in the airline. The wage cuts were made during a 2002 bankruptcy before Parker assumed control of the airline.
Parker told pilots the provision could be an impediment to a deal with another airline, Theuer said.
Mike Flores, a US Airways flight attendant and an executive with the Association of Flight Attendants, said his union has a similar provision that would raise their pay by roughly 20 percent if US Airways were folded into United or another airline.
Charlotte's hub in less peril
Any merger would have a significant impact on Charlotte, where US Airways employs 6,100 people.
When US Airways tried to take over Delta Air Lines in the fall of 2006, the hub at Charlotte/Douglas International Airport was believed to be in jeopardy.
The US Airways Charlotte hub was dwarfed by Delta's operation in Atlanta, and the two cities were so close geographically that many analysts predicted deep service cuts in the Queen City if the takeover had been successful.
But if US Airways and United Airlines merge, the Charlotte hub would be in a far stronger position.
United does not have a significant presence in the Southeast United States, and the US Airways Charlotte hub is almost as large as United's largest hub.
The sheer size of the Charlotte hub means it would probably remain a key part of a new airline, though some international flights could be moved to Washington, D.C., according to airline analysts.
US Airways has expanded its Charlotte hub significantly in the last four years, as it has shifted flights from Pittsburgh, Las Vegas and Phoenix. The hub now has 388,000 weekly seats, making it the fourth-largest hub in the country, according to an Airline Weekly analysis of data from OAG, the Official Airline Guide.
United's largest hub is at Chicago O'Hare, with 392,000 weekly seats.
Some overlap in D.C.
Adding Charlotte to United's portfolio would bring a large number of flights to the Caribbean and Florida, where United is weak.
But there would be some overlap with United's smaller hub at Washington Dulles, where the airline has 202,000 weekly seats.
For instance, United flies from Dulles to London, Frankfurt, Paris and Rome - all nonstops from Charlotte/Douglas. In addition, United flies from Dulles to Sao Paulo, Brazil. US Airways flies nonstop from Charlotte to Rio de Janiero, Brazil.
Robert Mann, an independent airline analyst at R.W. Mann & Co, said some international flights could shift from Charlotte to Washington Dulles, or at least future international growth might occur in the nation's capital.
But he said it would be difficult for the new airline to shift a large part of Charlotte's hub to Washington. One reason is that Dulles isn't the preferred airport for most Washington business travelers, who would rather use Reagan National, which is a 10-minute taxi ride from the city.
Last decade, Independence Air launched a hub at Washington Dulles and went bankrupt, closing in 2006.
"It's a problem; people value convenience," Mann said. "They vote with their wallets."
Domestic hub matters most
Seth Kaplan of Airline Weekly said it's better for a city to have a slightly smaller hub in a strong airline than a larger hub in a weak airline. US Airways is considered to be the weakest of the five large U.S. legacy carriers.
Bob Morgan of the Charlotte Chamber said international flights are important to a city, because of better connections and "cache." But he said a strong domestic hub is the most important to Charlotte.
He noted that when Toshiba announced it was expanding in Charlotte, it decided against bringing the jobs to cities with direct air service to Japan.
"What's important is for them to reach their North American customers," Morgan said.
US Airways chief executive Parker has long been a proponent of mergers, saying there are too many seats for sale, making it difficult to be profitable. (In all, airlines lost an estimated $9 billion in 2009, according to The International Air Transport Association.)
But Mann said he wouldn't necessarily expect significant cuts if United and US Airways merge. He said the industry has already made deep cuts due to the recession and high fuel prices in 2008.
After Delta and Northwest merged in 2008, Delta kept much of its existing routes and has so far kept smaller hubs such as Memphis. The merged company saved money by better utilizing the airplanes each carrier had, Mann said.
"Everyone has already cut capacity," Mann said. "In the past, low-cost carriers have then added flights. They haven't this time."
But Jamie Baker, an analyst with J.P. Morgan, said the "true value" in the merger would be through less flying - not from streamlining IT systems or airport operations.
In an analysis, Baker projected that a 10 percent cut in flights could increase profits by $800 million to $1.4 billion.
He said a United-US Airways merger is the "most logical and feasible" of the legacy airline combinations. The legacy airlines are Delta, American, United, Continental and US Airways.
Is Continental real target?
The New York Times reported Wednesday afternoon the two airlines were discussing a merger. United considered merging with America West in 1998, US Air in 2000 and US Airways in 2008.
The Wall Street Journal has reported that United is talking with US Airways only to improve its chances of partnering with Continental.
US Airways spokesperson Michelle Mohr said the airline couldn't comment on speculation about a merger.
One potential complication in a merger is the market share the combined airline would have in Washington, D.C., where US Airways is the dominant airline at Reagan National and United has a hub at Dulles. The merged airline would have more than 60 percent of the flights at the two airports.
Baker wrote the merger would likely "prove difficult" from a regulatory perspective.
He noted that the US Airways-America deal, as well as the American-TWA merger last decade were done with the threat of one carrier failing. When Delta and Northwest merged to form the world's largest airline in 2008, oil was more than $100 a barrel and crippling airlines.
US Airways lost $509 million in 2009, though its losses have narrowed. Its stock price closed Thursday at $7.55 a share, up 73 cents from Wednesday's close.
United lost $1.1 billion last year, excluding special items.
