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Air Canada may be part of AmWest, US Airways talks

By John Yantis, Tribune

Air Canada emerged Thursday as another potential player in merger talks between Tempe-based America West Airlines and US Airways.

The Toronto Star quoted a Wall Street source saying the Canadian airline may be in talks with both U.S. Airways and America West about a deal that may see Air Canada take additional international traffic while the potential U.S. Airways-America West entity would handle domestic U.S. traffic.

Robert Milton, chairman of ACE Aviation Holdings, the Montreal parent company of Air Canada, didn’t dismiss speculation his airline may be involved in a merger, possibly with America West, the newspaper said.

"Consolidation in the North American industry is inevitable," Milton told the paper. "To the extent Air Canada is or isn’t part of that is yet to be determined."

The Montreal Gazette also mentioned a potential merger between Air Canada and America West.

An America West spokesman would not confirm or deny talks with Air Canada are under way.

Some airline industry analysts said a deal among the trio of carriers would be intriguing. Michael Boyd, of the Boyd Aviation Group, said the combination could work well.

"For Air Canada, the big markets up there are being cherry-picked by WestJet and other low cost carriers," he said. "Their strength is their international traffic. There’s no question they could do a heck of a job. You go through U.S. Customs in Canada so that means you could funnel a lot of people to Toronto or Vancouver or even Calgary, run them internationally, and when they come back, they could clear Customs right there in Toronto, and then they could go anywhere in the United States at that point."

U.S. Airways flies internationally to Europe, Canada, the Caribbean and Latin America. America West flies internationally to Mexico, Canada and Costa Rica.

"I don’t know where US Air fits into this thing except as maybe somebody trying to save a mother ship, but certainly America West is a strong player, and the Air Canada thing is very, very compelling," Boyd said.

Ray Neidl of Calyon Securities said federal law prohibits Air Canada from flying international flights from the United States.

"But if they could get permission to code share, then the America West-US Air entity, if there was one, could operate international flights through the U.S. using the Air Canada code, or conversely, US Air and America West could stay domestic pretty much and have more feed (traffic) through Canada, through Montreal or Toronto from overseas through Canada into the U.S.," Neidl said.

Code sharing refers to a practice where a flight operated by an airline is jointly marketed as a flight for one or more other airlines.