US Airways looks at possible bid for American

Hoping a fourth try will be the charm in its effort to tie the knot with another carrier, US Airways Group Inc. is said to be analyzing a possible bid to acquire bankrupt American Airlines.

Although a bid is far from certain, and likely months away, Delta Air Lines and private-equity firm TPG Capital Group also are looking at American, according to published reports.

US Airways has hired Millstein & Co. to examine American, and Delta has hired the Blackstone Group, the Wall Street Journal reported earlier this month. None of the companies have commented.

American, the third-largest U.S. airline by passenger traffic, wants to remain independent. Views vary on whether that is likely.

"If I had to bet today - does American make it through unscathed, or do they have to take a partner? - I would say 60-65 percent they will emerge stand-alone," said airline analyst Bob McAdoo, of Avondale Partners L.L.C. "If there is a merger, of all the partners out there, I would put US Airways at 70 percent, maybe JetBlue at 20 percent, and Delta at 5 percent."

Wolfe Trahan & Co. analyst Hunter Keay put the chance of American remaining independent at "a 20 percent probability, at most." There are advantages to a would-be buyer moving early, he said in a client note.

Looking at the bids from four angles - alliances, labor, network, and fleet - Keay sees "less resistance for a successful US Airways bid."

Delta, the second-largest carrier by passenger traffic after combining with Northwest Airlines, would face regulatory hurdles and antitrust concerns from the Justice Department, observers say.

"Perhaps the biggest obstacles to an American acquisition by Delta or any other carrier are its turbulent labor troubles and significantly underfunded pensions," Gimme Credit bond analyst Vicki Bryan wrote in a client note.

"We have not been a fan of the American/US Airways combination, which could yield a still struggling competitor with weak revenue and above average costs," she wrote.

US Airways still has not integrated the seniority lists and pay of its pilots and flight attendants since the merger of US Airways and America West in 2005. "Delta has demonstrated greater success in solving potentially prickly labor concerns," Bryan said.

Delta would have to make "major concessions" to get regulatory approval, but would like to have American's routes in Latin America, said Dahlman Rose & Co. analyst Helane Becker in a research note. "If there were a bidding war for these assets, we believe Delta could easily muscle out most competitors."

A US Airways-American combination would make the new airline about the size of United and Delta.

US Airways' Philadelphia hub could help American gather traffic from the eastern third of country to send to Europe, said McAdoo of Avondale Partners. "There are a bunch of cities that US Airways flies to out of Philadelphia and Europe that American doesn't fly to out of New York."

Other analysts said that US Airways would not help in key markets such as Asia, where American is weaker.

US Airways president Scott Kirby is leading the carrier's analysis of how to combine US Airways and American, Bloomberg News reported, citing two unnamed people. US Airways spokesman Todd Lehmacher said he could not comment.

"We think Delta chose not to wait around for US Airways to 'get its house in order' to beat Delta to the punch, but rather force an early start to the process to maximize its bidding leverage," analyst Keay wrote.

US Airways in 2007 attempted a hostile bid for then-bankrupt Delta. Delta instead combined with Northwest.

US Airways made plays in 2008 and 2010 for United Airlines, which then merged with Continental Airlines.

"We see fewer hurdles with an American-US Airways merger than we do an American-Delta merger, but it should be noted this process has just begun," Keay wrote, "and the only consistent thing about airlines tends to be change."