March 16, 2007

US Airways won't be gun-shy after Delta setback

Calculated business risks have made US Airways among the nation's most profitable, and its recent failure to acquire Atlanta-based Delta Air Lines won't make it gun-shy, CEO Douglas Parker said Wednesday.

Speaking to journalists at the airline's annual media day here, Parker said US Airways has been willing to take on ventures that "other companies are reluctant to try because they'd get embarrassed doing high profile things like this and not having them go their way."

His airline's propensity to take business risks that make sense has helped transform the once-beleaguered US Airways into one of the strongest domestic carriers. As CEO of the old America West, Parker in 2005 led the acquisition of US Airways out of its Chapter 11 bankruptcy.

For 2006, the company reported a net profit of $303 million, or $3.32 per share.

Parker's second attempt to acquire a competitor in bankruptcy failed when Delta creditors on Jan. 31 2007 rejected US Airways' stock-and-cash offer of $10 billion.

While the failed Delta bid was perhaps the airline's most high profile setback, Parker noted that it was not the first. In 2004, Parker's America West considered making a bid for some of the assets of Indianapolis-based ATA Airways, which was then in bankruptcy reorganization.

"We made a run for ATA and thought it made a lot of sense for us," Parker says. "We got our hats handed to us by Southwest," which acquired the ATA assets and entered a cooperative agreement with the discounter.

Parker says it's his company's response to that setback that shows how US Airways has become one of the industry's current success stories.

"We turned that into – 6 months later – the US Airways transaction because the same people who were working for us said, 'Hey, I got a different idea,' " Parker says.

In 2005, America West ended its much ballyhooed expansion of transcontinental service. Parker says that setback came after a blistering competitive response by rivals such American Airlines to the airline's entry into the transcontinental market.

For now, Parker says US Airways is prepared to move ahead as a stand-alone carrier since the industry-wide momentum for consolidation seems to have cooled.

"I think there won't be much (consolidation) that happens in the near team," he predicted. His company has turned to completing its 2005 merger.

But if industry merger talk heats up, Parker says, US Airways could be just as aggressive then as it was with its failed Delta bid.

"If something happens, we're going to be involved," he says.


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