PHOENIX (

TheStreet

) -- After attempting four mergers in six years, executives at

US Airways

(LCC)

must have been captivated by a recent report suggesting that

American

(AMR)

could save hundreds of millions annually by cutting capacity.

Isn't that exactly the scenario that occurred when the same executives, who then ran

America West

, took over US Airways in 2005?

The

controversial report by Avondale Partners analyst Bob McAdoo said American is losing $1 billion annually because of decisions to put too much capacity on key routes. "American's problems are clearly fixable, either by this management or by some other," McAdoo wrote.

Speculation about a US Airways/American deal has been persistent over the past few years. It reached the point that in June 2010, AMR CEO Gerard Arpey, who normally won't comment on American merger chatter,

felt compelled to deny it.

However, just because American does not want to do a merger with US Airways does not mean that US Airways wouldn't try to put one together. It made a hostile bid for bankrupt

Delta

(DAL) - Get Report

in 2008.

It is worthwhile to consider that American's market capitalization is a surprisingly low $2.2 billion. By contrast, American's peers, Delta and

United

(UAL) - Get Report

, have market caps of $9.5 billion and $8.7 billion, respectively. In fact, US Airways' market cap of $1.6 billion isn't that far below American's.

Of course, a takeover would be far easier in bankruptcy court, and American does not appear to be remotely near bankruptcy. In fact, its management has steadfastly opposed a bankruptcy filing, largely on moral grounds. "This company stands for something, more than just any old company," Arpey declared, in an August 2010

interview.

"If American went into bankruptcy, it's a given, US Airways would be there," said Mike Flores, president of the US Airways chapter of the Association of Flight Attendants. "I truly think that (Doug) Parker and his companions from America West are just sitting there waiting for the day that American files."

Absent a bankruptcy filing, Flores said, a merger with American is far tougher, because most American employees still have the expensive defined benefit pension plans that other carriers shed in bankruptcy. Additionally, American's 619 aircraft includes 247 older MD-80s, which could be around for a long time absent a bankruptcy restructuring. "With those liabilities, I can't see doing a hostile takeover of American," Flores said.

The US Airways management team attempted its first big deal in 2004. Doug Parker, Scott Kirby and Derek Kerr were running America West, which had annual revenues of $2.4 billion, when they bid for

troubled

ATA.

The effort failed, but in 2005 they made a deal to merge with US Airways and to take over management, even though America West put up no money.

In the first quarter of 2006, the bankruptcy court downsizing of US Airways' route structure enabled a dramatic 28% unit-revenue increase on those routes. "Some people don't seem to recognize the value you can create if you can get out of airplanes and get out of some of your worst-performing markets," said Parker, during an earnings conference call. The scenario is exactly what McAdoo seems to envision at American.

In 2006, Parker found investors to back an $8 billion bid (half cash, half stock) for far-larger

Delta

(DAL) - Get Report

In 2008 and again in 2010, he unsuccessfully sought a merger with

United

(UAL) - Get Report

.

Aviation consultant Robert Mann said it is easy to imagine that US Airways would mount a bid for American. US Airways executives "have had a very consistent view over the longer term that consolidation is good," he said. "They have been proponents, and indeed activists, in trying to move that process along."

Mann said the 2005 merger success would be an asset in raising money. "The investors in that deal did very well," he said. "If Doug (Parker) put together the usual compelling power point deck, I believe they would get it financed before they walked out of the building."

Aviation consultant Sandy Rederer said a deal is feasible, but without bankruptcy it faces some challenging obstacles. "The biggest problem with any airline merger is labor, and in the case of American you've got some of the highest-paid workers in the U.S. airline industry, workers who still have a defined benefit pension plan," he said. "This is a very expensive operation, and if you overlaid the American contract wages and benefits on the US Airways system, you'd have a much bigger loser than what you've got.

"I can't imagine a hostile takeover of AMR in this era," Rederer said. But because US Airways could advantageously switch from

Star Alliance to Oneworld, and because of hub synergies, Rederer said he is "generally positive about the combination"

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

>To contact the writer of this article, click here:

Ted Reed