It was reported on Wednesday that US Air has retained a team of advisor to explore possible options for acquiring American Airlines. I had written a little bit about this a few days ago when rumors first emerged.

Reuters had confirmed that US Airways did in fact retain Barclays Capital, Millstein & Co. and Latham & Watkins. This according to US Airways CEO Doug Parker.

In recent weeks there has been speculation that either Delta or US Air would attempt to acquire American Airlines which is currently under bankruptcy protection while it is being restructured. An acquisition of this size would obviously send shock waves through the industry and give regulators plenty of things to consider to ensure that the acquisition is fair to the marketplace.

For passengers, the much more important piece would be the implications such an acquisition would have to the airline alliances. American being a keystone member of Oneworld is critical to that alliance’s success. Would Oneworld be able to survive without a US based carrier? I have my doubts.

BUT…

On the other hand, an acquisition of American by US Air makes a lot of sense if US Air is going to use American as a conduit to remove itself from the Star Alliance where it seems to frequently play the role of Rodney Dangerfield and “doesn’t get any respect”. From this perspective, US Air making a move to Oneworld would be a stroke of genius and balance the power of alliances in the USA and give US Airways much stronger footing as an influential alliance member. Currently, United is by far and away the dominant Star Alliance carrier in the US and US Air will never have a chance to play a leading role in Star Alliance as long as the balance of power stays the way it is.

I can easily see US Air following this path and using American to change alliances. I don’t think there would be any hard feelings between Star Alliance and US Air.

Delta as a suitor makes less sense to me since they’ve already merged with Northwest and have plenty of market share and are a major part of Skyteam. Adding American to their “hangar” would certainly raise regulatory eyebrows. I can’t imagine that Delta would be allowed to combine 3 major airlines into one Mega-Airline.

This developing drama will continue to unfold and I’m sure there will be surprises along the way. But that makes it all the more interesting…….Keep in mind these are my opinions and nothing more!

Here is the excerpt from the Reuters article providing additional details:

Jan 25 (Reuters) – US Airways Group (LCC.N) confirmed on Wednesday that it hired advisers to explore a deal with bankrupt carrier American Airlines but said consolidation was no longer “imperative” for the industry’s health.

The news came the same day US Airways and Delta Air Lines (DAL.N) reported stronger-than-expected fourth-quarter profits, buoyed by higher ticket prices and curtailed capacity.

US Airways hired Barclays Capital, Millstein & Co and Latham & Watkins to explore its options related to American parent AMR Corp, which filed for bankruptcy in November, US Airways Chief Executive Doug Parker said during a conference call.

“We expect AMR will remain in bankruptcy and we anticipate that we and our advisers will be studying the situation for quite some time,” Parker, a long-time advocate of consolidation to cure the industry’s ills, told analysts and reporters.

People familiar with the matter have said US Airways and Delta are each exploring a merger with AM. Private equity firm TPG Capital TPG.UL is also considering a deal.

During a separate earnings call, Delta declined to comment on industry consolidation or a possible deal with AMR Corp.

The airline industry is two years into a recovery aided by capacity cuts and higher fares after a decade-long downturn that cascaded into a series of bankruptcies and airline mergers.

Parker pointed to the flurry of recent large-scale airline mergers as evidence that industry is no longer as fragmented as it was in the middle of the last decade.

In 2010, United Airlines and Continental Airlines combined to form United Continental, while Delta bought Northwest Airlines in 2008.

Shares of both airlines shot up on the New York Stock Exchange. Delta shares rose more than 6 percent, while US Airways stock jumped more than 17 percent.

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