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US Airways Exec: Labor Support Needed for Takeover Bid

Stocks in this article: DAL LCC UAL

CHARLOTTE, N.C. ( TheStreet) -- If you want to do a merger in the airline business, "it's important to have allies," particularly labor allies, on your side, US Airways (LCC) President Scott Kirby said Tuesday.

Speaking at the JPMorgan (JPM) transportation conference, Kirby was asked what lessons US Airways has learned from its failed 2006 effort to acquire Delta (DAL) in a hostile takeover.

"One thing we learned is we can't do it alone," Kirby responded. "In an ideal world, it's important to have the constituents of bankruptcy, particularly labor, on your side. An outright hostile transaction won't work."

During the failed bid, Delta employees, led by the airline's chapter of the Air Line Pilots Association, mounted a "Keep Delta My Delta" campaign, complete with banners and campaign-style pins. That bid collapsed after Senate Commerce Committee hearing in January 2007 packed with Delta employees who opposed the merger. Within two weeks, Delta's creditors decided it would take too long for a takeover battle to play out.

Kirby declined to comment specifically on US Airways' continuing study of a takeover of bankrupt AMR. He did, however, say that a recent report by JPMorgan analyst Jamie Baker was "mostly factual."

The report, which advocated for a merger, detailed American's domestic network shortcomings and listed 30 smaller cities, such as Columbia, S.C., Providence, R.I., and Richmond, Va., where Delta and United (UAL) offer far more service to their hubs than American offers to its hubs.

American has said that if it had fewer restrictions on regional jet flying in its pilot contract, it could in fact serve more smaller cities.

Subsequently, Kirby was asked whether Charlotte, US Airways' largest hub, is profitable, and he seemed to speak to the points in Baker's report, because he said Charlotte thrives on feed traffic from 30 to 40 smaller Southeast cities such as Columbia; Asheville, N.C.; and Wilmington, N.C. In such cities, passengers connect to the world either through Atlanta or Charlotte.

"Charlotte is the fourth-most profitable hub operation in the country due to its unique catchment area," Kirby said. In Wilmington, for instance, "we can be the dominant carrier for corporate accounts" because passengers can connect through the Charlotte hub, which offers 605 daily departures."

Kirby was also asked whether US Airways could leave Star Alliance in the event of a merger: American is in the Oneworld Alliance. He called Star "the best alliance, the largest and best integrated ," but noted: "In consolidation, we can move."

-- Written by Ted Reed in Charlotte, N.C.

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