The combined company, which will operate under the name US Airways, will be funded by $1.5 billion in new capital.

Share story

PHOENIX — US Airways Group Inc. and America West Holdings Corp., the nation’s seventh- and eighth-largest carriers, said today that they are merging.

The combined company, which will operate under the name US Airways, will be funded by $1.5 billion in new capital from a variety of investors, including aircraft maker Airbus.

The goal of the merger is to stitch together two geographically distinct carriers with a history of financial struggles into a stronger airline that would compete better with lower-cost rivals such as Southwest Airlines Inc. and JetBlue Airways Corp.

“Building upon two complementary networks with similar fleets, closely aligned labor contracts and two outstanding teams of people, this merger creates the first nationwide full service low-cost airline,” said Doug Parker, chief executive and president of America West Holdings. “Through this combination, we are seizing the opportunity to strengthen our business rather than waiting for the industry environment to improve.”

US Airways President and CEO Bruce Lakefield said the merger will ensure US Airways’ long-term viability and the security of its employees.

US Airways, which last year made its second trip into bankruptcy in two years, slashed worker pay by $1 billion a year and shed $3 billion in pension obligations.

The Arlington, Va.-based carrier said its goal was to reinvent itself as a low-cost carrier like Jet Blue or America West. But even after the cost reductions, the airline struggled as fuel costs soared and low-fare competitors drove ticket prices down.

America West, which was founded in 1983 and is based in Tempe, Ariz., operates flights across the country through its hubs in Phoenix and Las Vegas.

When Parker took over as chief executive in 2001, America West was dogged by a reputation as a carrier that delayed flights, lost luggage and left customers waiting.

The company was pushed to the brink of bankruptcy shortly after the Sept. 11, 2004 terrorist attacks and secured a $429 million loan guarantee from the federal government. Parker has said the guarantee allowed America West to avoid Chapter 11 bankruptcy, a move the airline might not have survived.

Its service record has since improved. In July 2003, the company reported its first of several quarters of profits after more than two years of losses. Its earnings have since have been mixed, due largely to high fuel costs and too many cheap fares in the market.

America West and US Airways ranked ninth and tenth, respectively, in terms of passengers boarding at Seattle-Tacoma International Airport during this year’s first quarter. America West carried 84,851 passengers, or 2.7 percent of Sea-Tac’s total traffic, while US Airways carried 43,706 passengers for a 1.4 percent market share, according to Port of Seattle statistics. If it retained that volume, the combined airline would displace Continental Airlines as No. 8.

Seattle Times staff contributed to this report.