Now that talks between United Airlines and US Airways have fallen apart, what lies ahead for US Airways, which shuttles two-thirds of the passengers at Philadelphia International Airport?
Another attempt at consolidation? An alliance with a carrier?
The short answer: It depends on the price of crude oil.
If oil climbs to $175 a barrel, all airlines will be in deep trouble - and several likely will file for bankruptcy, as early as next year.
But if oil drops to $70 a barrel - where it was six months ago - or even to $100, more airlines will be able to go it alone for longer.
US Airways chief executive Douglas Parker is a big proponent of industry consolidation through mergers, and US Airways Group Inc. itself is the product of a 2005 merger with America West Holdings Corp.
But Parker told employees in a letter yesterday that US Airways would not take part in a merger "at this time," although he did not rule out such action in the future.
"It is simply unlikely that anything will happen in 2008 as our industry continues to struggle" with oil prices of about $130 a barrel, Parker said.
United is now discussing a potential marketing alliance with Continental Airlines Inc. For US Airways, there may be no major "legacy" airline interested in combining.
"US Airways is likely the least attractive candidate in a consolidation scenario," Morningstar Inc. analyst Brian Nelson said. That's because 80 percent of the airline's revenue comes from domestic flights and 20 percent from international flights. Continental, in contrast, gets 50 percent of its revenue from international travel. U.S. carriers have their own domestic routes and want partners with more global reach.
US Airways' financial picture is also not the strongest, Nelson said. "Its liquidity position is something we are watching very closely," he said.
US Airways has roughly $2.1 billion in "unrestricted cash" and a term-loan of about $1.6 billion. A "major convenant" on the loan requires a "minimum unrestricted cash balance" of $1.25 billion, the Morningstar analyst said.
US Airways has roughly a $1 billion buffer between its current unrestricted cash and the covenant. If there were a violation of the covenant, it would accelerate the repayment of the loan, according to Nelson.
"Really, it's going to come down to what the price of crude oil does over the next six to nine months," Nelson said. "That's largely going to determine how financially fit US Airways is going to be."
Nelson considers US Airways "one of the more likely" of the six biggest U.S. airlines to file for Chapter 11 protection, along with American Airlines Inc.
But he cautioned that the industry could "change on a dime" if crude oil rose above $150 or fell below $100 a barrel. Factor in the souring economy, and the possibility people may travel less in coming months, and the financial picture is precarious, he said.
Thomas Kelly, credit manager at Standard & Poor's, said suspension of merger talks was "probably a blow" to US Airways, but that S&P didn't view the merger as a "panacea."
S&P credit analyst Philip Baggaley wrote in a recent research note that he saw "advantages and disadvantages" to a US Airways-United merger.
The negatives included that the network would not be "as strong" as with some other airlines. And US Airways hubs in Philadelphia, Charlotte, Phoenix and Las Vegas are "primarily leisure destinations." In all those cities, US Airways faces "fierce competition from low-cost carrier Southwest Airlines," Baggaley said.
It appears United called off the merger with US Airways, several analysts said. United, almost immediately, announced it would try to forge a marketing alliance with Continental.
"They clearly didn't agree on everything, and clearly United had another alternative and US Airways didn't at the moment," S&P's Kelly said.
Standard & Poor's last week placed nine airlines, including US Airways, on "CreditWatch with negative implications," citing severe financial damage from unprecedented high jet-fuel prices.
Looking ahead, one difficulty is that airlines, including US Airways, have been through bankruptcy "once and perhaps twice" and have already significantly cut costs, such as pension obligations, Kelly said.
"Many of the assets that are available are more encumbered," he said. "It may make it more likely that they have to liquidate and not reemerge from bankruptcy."
Most analysts believe there will be more airline consolidation, which could "forestall some of the stresses," Kelly said. "But who would have predicted $140 oil? We are in uncharted territory. It's extremely hard to predict what's happening out there."