America West Selects Investors to Help It Out of Bankruptcy : Airlines: The carrier and Continental might coordinate operations under the deal.

America West Airlines said Friday that it has selected an investment group that includes Continental Airlines to help it emerge from bankruptcy.

Phoenix-based America West and Houston-based Continental would remain separate carriers but would probably coordinate flight schedules, frequent flier programs and other operations under a tentative deal forged by Ft. Worth, Tex.-based investor David Bonderman.

Bonderman and fellow investor David Coulter teamed up with Air Canada last year to lead Continental out of Chapter 11 Bankruptcy Court protection in return for 28% of the fifth-largest U.S. carrier.

The alliance between the two carriers would help ensure America West’s long-term viability and give Continental greater access to the western United States.

Continental and America West “are both low-cost providers, and (their alliance) could give the big guys fits,” airline industry analyst Ernest Arvai said.

The new Bonderman investment group, AmWest Partners--which includes Continental, Fidelity Investments and regional carrier Mesa Airlines--would pump $220 million into America West, which filed for Chapter 11 bankruptcy protection nearly 2 1/2 years ago. In return, the group would receive a 37.5% stake in a reorganized America West.

Of the remaining stock, 45% would go to unsecured creditors, 7.5% to one secured creditor and 10% to current stockholders, if all claims are paid.

“Under this proposal, America West will emerge from bankruptcy with a strong balance sheet and healthy cash reserves,” Chairman Bill Franke said in a statement.

The proposal must still be approved by America West’s creditors and the U.S. Bankruptcy Court.

In fact, the offer faces opposition from the airline’s unsecured creditors, who said Friday that they back a plan that would give them control of the airline.

Arthur B. Newman, an investment banker with the Blackstone Group, a financial adviser to the unsecured creditors committee, said the committee would back a plan led by New York money manager Michael Steinhardt. The Steinhardt group had initially offered $250 million for 80% of the airline.

Newman said Friday that the group has since revised its offer to $200 million for 49%, with unsecured creditors getting the remaining 51%.

Industry analysts said America West and Continental stand to benefit from the deal. For example, Continental could conceivably shift its troubled Denver operations--where it faces high costs and intense competition from United Airlines--to America West’s Phoenix hub.

“It allows Continental to concentrate on the easy pickings in the eastern United States,” where Continental has a large advantage over higher-cost carriers such as USAir, said David Hoppin, and airline industry analyst.

Mesa Air could also play a larger role in feeding traffic to both carriers.

The deal would give investor Bonderman a substantial foothold in the highly competitive airline industry.

Bonderman, who in the 1980s was a top adviser to Texas billionaire and takeover artist Robert M. Bass, “is now involved with some of the key low-cost providers of service in the industry,” airline consultant David Banmiller said. “It’s a situation where low costs have become the key to survival and success in the industry.”

America West stock rose 62.5 cents Friday to close at $2.875 in Nasdaq trading. Continental’s Class A shares fell $1 to $24.375 on the New York Stock Exchange, while its Class B shares dropped 37.5 cents to $21.75.

Associated Press contributed to this report.