US Air CEO Hints at Merger Interest

US Airways (LCC Quote) has an obligation to consider a merger with Delta Air Lines (DALRQ Quote) or Northwest Airlines (NWACQ Quote) because "tremendous value can be created through consolidation," the airline's chief executive said Thursday.

Doug Parker, the CEO of the Phoenix-based carrier, made the comments on a conference call after US Airways reported a record second-quarter profit that reflected sharp improvements in the performance of its two predecessors. The airline, formed by the merger of the old US Airways and America West Airlines 10 months ago, posted second-quarter earnings of $305 million, or $3.25 a share.

Excluding special items, the company would have earned $315 million, or $3.35 a share. Revenue was $3.2 billion. Analysts surveyed by Thomson Financial had expected earnings of $3.24 a share on revenue of $3.14 billion.

Parker pointed out that the merger put together America West, which had a market capitalization of $200 million, the bankrupt former US Airways, which had no equity value, and $800 million in new equity. The resulting company now has market capitalization of $5 billion.

"If people don't see the value of consolidation, it's because they don't want to," Parker said. "That value is created much more when two airlines are in bankruptcy. It would be negligent for us to ignore that there are two airlines still in bankruptcy that are going to have to emerge at some point. They will need to investigate it, and when they do, we would have to be there."

Parker noted that he was commenting generally and declined to say specifically whether the airline is pursuing a merger. Delta spokeswoman Gina Laughlin said her company's strategy "is to emerge as a stand-alone airline. Everything else is speculation." Northwest spokesman Kurt Ebenhoch said, "We are totally focused on restructuring Northwest for long-term success."