US Airways doesn't have to merge with another carrier, CEO Doug Parker said Wednesday, but a merger could be advantageous and is still under consideration.
Parker took the stage to the tune of Adele's song "Rumor Has It," a tacit acknowledgement of the swirl of speculation about a potential US Airways-American Airlines merger since American declared bankruptcy late last year.
"US Airways certainly doesn't need to merge," said Parker at US Airways' annual media day. "It might make sense for us to do something. It always could be in our best interest."
Tempe, Ariz.-based US Airways confirmed in January that it has hired advisers to examine a merger with American. Parker hinted Wednesday that a merger, if one were to occur, is still a ways off.
"We have hired advisers to investigate the American situation," said Parker. "That work continues. ... That's where I would expect us to be for quite some time."
American CEO Tom Horton has said it would be "unwise" to consider a merger during bankruptcy proceedings, but that the carrier is open to a merger in the future.
Any combination of US Airways and American could have big implications for Charlotte, where the carrier operates about 90 percent of daily flights. US Airways operates its busiest hub in Charlotte, with more than 600 daily departures and thousands of employees based in the city.
Consolidation has reshaped the industry since the mid-2000s. In 2005, at least 12 carriers had a domestic market share of at least 1 percent. Now, after mergers including US Airways-America West, United-Continental, Delta-Northwest and Southwest-AirTran, that number is down to seven carriers, who all have at least 3 percent market share.
The remaining carriers have also cut capacity, lowering the supply of available seats. Since 2005, the industry overall has lowered capacity by about 1 percent, and US Airways has reduced its capacity by almost 8 percent.
That's made it easier for the airlines to raise fares - and while consumers don't like the higher cost, executives say they're essential to keeping the company profitable.
In 2008, when jet fuel prices spiked, US Airways lost $808 million.
"We just ate the cost," said US Airways President Scott Kirby. In contrast, in 2011, the next time jet fuel's price surged, the airline was able to raise fares enough to cover 85 percent of the spike, passing the cost along to consumers.
"That's what allowed us to be successful in 2011," said Kirby. US Airways ended up eking out a 1 percent profit margin in 2011.
One thing that's not going to change is the proliferation of much-maligned fees for services, many of which used to be bundled into the ticket price. US Airways got $537 million in revenue from fees in 2011, most of that charges for checked bags. That's up from $168 million in 2008.
"The introduction of ancillary revenues is really a permanent change in the industry," said Kirby.
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