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Last Updated: Monday, 12 September 2005, 10:54 GMT 11:54 UK
Skies clear for US airline merger
US Airways jet landing at Regan National Airport
The combined airline would continue to carry the name US Airways
Plans to create one of America's biggest budget airlines could be sealed as soon as October, officials say.

America West Airlines and troubled rival US Airways have announced plans to merge, creating the sixth-biggest US airline in terms of passenger miles.

The combined airline, which would be dominated by America West but called US Airways, hopes to compete with budget rivals Southwest Airlines and JetBlue.

America West shareholders are due to vote on the proposed deal on Tuesday.

If, as expected, they back the plan, the merger process will move on to a bankruptcy court in Virginia where final consideration will be given to US Airways' reorganisation.

Creditors for US Airways have already signalled their support for the deal.

Financial troubles

It's all going through on schedule - the big question is can they make it work post-merger
Ray Neidl, Calyon Securities

US Airways and America West are currently the seventh and eighth-largest airlines in the US.

Both firms have had financial troubles, with US Airways seeking bankruptcy protection twice in two years.

The planned merger will receive $1.5bn (816m) in new capital from a group of investors including European planemaker Airbus.

The combined airline is expected to cut its 400-strong fleet by about 50 jets, while America West boss Doug Parker would become the new company's chief executive.

"It's all going through on schedule. The big question is can they make it work post-merger," said airline analyst Ray Neidl of Calyon Securities.

Debt worries

America West and US Airways' tie-up comes at a turbulent time for US airlines, as they struggle to cope with high fuel prices and cut-throat competition.

Union officials representing striking mechanics at Northwest Airlines on Sunday called off talks aimed at resolving a 23-day dispute at the firm.

Northwest is seeking $203m in cost savings from the mechanics - part of a $1.1bn restructuring package aimed at averting bankruptcy.

Meanwhile, speculation that America's third-biggest carrier, Delta Air Lines, could file for Chapter 11 protection has continued to surround the firm.

Delta sold its Atlantic Southeast subsidiary to rival Skywest for $425m last month to help reduce its debt levels.

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