Reports and rumors persist that US Airways Group is studying a merger with bankrupt AMR’s American Airlines, which would shrink the US industry to three major full-service airlines, increasing their power to raise rates.

A possible merger "would fix a weak domestic route system at American Airlines and boost revenue, two people familiar with the matter said," according to Bloomberg News, which has repeatedly reported that the merger was being considered.

If US and American do merge, the combined airline would surpass Delta as the second-biggest airline in the US. It would also meet US Airways CEO Doug Parker’s announced goal for consolidation.

Some commentators call any such merger unlikely to be approved by the US Justice Department because it would greatly reduce airline competition.

US Airways has previously made unsuccessful bids for Delta Air Lines and United Airlines.

US Airways is no stranger to merger. It last merged with America West in 2005.

Meanwhile, in other updated airline news, a groundbreaking was held for a $160 million redevelopment project at George Bush International Airport that is only the start of a $1 billion effort.

Phase one of the three-phase project in Houston will create a new 225,000-square-foot Terminal B, south concourse. United Continental Holdings Inc. is partnering with the Houston Airport system for the first phase due to be completed in 2013, according to the Houston Business Journal.

"Houston will thrive as our global gateway expands to include more flights and greater access to business connections around the world," Houston Mayor Annise Parker said in a statement.

Altogether, the tab for the multi-phase project is $1 billion, including redevelopment of the central Terminal B lobby and baggage claim areas, a new north concourse for mainline and regional jets, a new Terminal B Federal Inspections Services facility and infrastructure improvements.

In still another development, two recent moves by Southwest Airlines could impact future passenger comfort and have a lasting impact on the travel health of some destinations.

Southwest unveiled its "evolve" seats, which were seen as a major aircraft interior redesign featuring lighter seating. The company says it will improve comfort for passengers with more under-seat space for carryon luggage and features such as netted seat pockets, fixed  headrests for better neck support and improved seat ergonomics.

Southwest also announced which AirTran Airways cities will continue service and which will be cut as it continues to absorb the smaller carrier.

Where the airline flies is important not only for individual business and leisure travelers but also can have a serious impact on overall tourism at destinations.

"What passengers will think of it remains to be seen, but there’s no question that Southwest Airlines’ plan to add seats to most of its Boeing 737 jet fleet will have a side benefit for Las Vegas and every other city the airline services," writes Vegas.com.

That benefit would be more capacity into the market — more than 1,000 seats a day in Las Vegas, for example.

Dallas-based Southwest said it will cease AirTran operations at these cities effective Aug. 12: Allentown, Pa.; Lexington, Ky.; Harrisburg, Pa.; Sarasota, Fla.; Hunstville, Ala.; and White Plains, N.Y.

Southwest said it will eventually convert AirTran service to Southwest at these cities: Flint, Mich.; Rochester, N.Y.; Pensacola, Fla.; Charlotte, N.C.; Dayton, Ohio; Richmond, Va.; Key West, Fla.; Washington, D.C.; Memphis; Akron-Canton, Ohio; Wichita, Kan.; Des Moines, Iowa; Branson, Mo.; Portland, Maine; Grand Rapids, Mich.; Punta Cana, Dominican Republic; Cancun, Mexico; Montego Bay, Jamaica; Aruba; San Juan Puerto Rico; Bermuda; Nassau, The Bahamas; Mexico City; and San Jose Cabo, Mexico.

"There are some markets that we simply cannot make work in the current fuel environment, so we’ve had to make the decision to discontinue service in those locations," said Bob Jordan, president of AirTran and executive vp at Southwest.

By David Wilkening

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