Airline industry focuses on fate of US Airways

updated 12:58 p.m. ET April 29, 2005

NEW YORK - Whatever happens to US Airways Group Inc. in the coming months matters — for its employees, shareholders and customers, and the rest of the airline industry as well.

With much of the airline business plagued by expensive fuel, low fares and excess capacity, US Airways' competitors are closely watching to see if the struggling carrier emerges from bankruptcy as a healthier entity, merges with someone else or eventually goes out of business.

A liquidation of US Airways, the nation's seventh-largest airline by traffic, would no doubt receive a collective cheer from other carriers that are having difficulties operating in this tough business climate.

But the same won't likely hold true should all or parts of US Airways stay alive.

It's just the latest chapter in what has been a turbulent ride for US Airways, whose Chapter 11 bankruptcy filing in September was the second in as many years.

Even with major cost cutting that has come largely through job cuts and labor concessions, the Arlington, Va.-based company continues to struggle and has acknowledged it does not expect to turn a substantial profit until at least 2008.

The airline industry overall has had a terrible run in recent years. After booming in the 1990s — when fuel prices were reasonable and planes were full of high-paying passengers — business slumped after the 2001 terrorist attacks and many of the airlines have never been able to regain their profitable momentum.

The fate of US Airways could be decided in the coming months. At least that is what is being anticipated as a result of the carrier's talks with America West Holding Co., the nation's eighth-largest carrier, to unite their operations. Also, an end of April deadline looms for US Airways to submit its reorganization plan with the U.S. Bankruptcy Court.

"We are now seeing the appearance of increasing desperate measures on the part of US Airways," said Robert W. Mann, owner of an airline consulting firm based in Port Washington, N.Y., who added that something has to happen for US Airways to "avoid getting the plug pulled on it."

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