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. Last Updated: 07/27/2016

Paper: Airbus May Fund Airline Merger

SAN FRANCISCO -- America West Airlines and US Airways are talking with Airbus, hedge fund Par Capital Management and Air Canada's parent about funding a merger of the two U.S. carriers, people familiar with the talks said.

Airbus may provide a $250 million loan in exchange for aircraft orders, Air Canada parent Ace Aviation Holdings may contribute $100 million to $150 million in equity, and Par Capital and a second hedge fund may provide a combined $125 million in equity, The Wall Street Journal said late Sunday.

The two carriers need financial partners for a merger because US Airways does not have funding to emerge from bankruptcy and America West has said it would not invest much of its own capital. A merger would combine the East Coast network of US Airways with the western U.S.-focused route system of America West.

"There's probably somebody you could find that would invest in this combination, but the real issue is what's the business plan going forward,'' said Robert Mann, head of airline consulting firm R.W. Mann & Co.

"Unless they can really show they can sweat out all the costs and not have any [labor] integration problems, I just don't see how this works in the short term.''

US Airways and America West declined to comment. Airbus spokeswoman Barbara Kracht also declined to comment, as did Air Canada.

The merged airline would displace Southwest Airlines as the No. 6 U.S. airline based on miles flown by paying passengers. US Airways is currently No. 7, and America West is No. 8.

The merged airline would likely require as much as $750 million in financing to meet the $350 million US Airways said it needed to emerge from bankruptcy and the funding America West needs to avoid its own liquidity problems later this year, Mann said.