American, US Airways Merger Takes Off Today

by , Dec 9, 2013, 7:50 AM
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It has been a bumpy ride but the merger between American Airlines and US Airways is expected to reach its destination this morning as several federal courts turned down requests over the weekend by a group of 40 plaintiffs “to stop the merger on antitrust grounds,” as the Dallas News’ Terry Maxon blogged yesterday, culminating in U.S. Supreme Court Justice Ruth Bader Ginsburg nixing a request for a stay late Saturday.

“The merger survived a challenge from the government and criticism from consumer groups, who fear it will lead to higher prices,” writes the AP’s David Koenig in the Miami Herald. “It's the latest in a series of mergers that will leave four airlines controlling more than 80% of the U.S. air-travel market and with more power than ever to limit seats and boost profits.”

The deal will be signed early this morning. William Douglas "Doug" Parker, who wakes up this morning as CEO of US Airways Groups Inc. but instantly will become CEO of American Airlines Group Inc. — as the combined entity will be known — will then ring the opening bell for the Nasdaq Stock Market, where the company will trade under the AAL symbol. American will also emerge from two years in bankruptcy protection as the ink dries.

“Passengers likely will not see effects of the merger immediately,” reports CNNMoney.com. They will continue to book flights under the American Airlines and US Airways brands. Ticketing and frequent flier programs are expected to be combined — at the earliest — in 2014.”

In a separate interview with Koenig in his “spartan, temporary office in American's Fort Worth headquarters,” Parker himself brings up the challenge of “two complex organizations that need to be melded into one over time” but points out that each airline has already been through the process and there are “consultants on board.” He also tells Koenig that “American's buttoned-down, corporate culture will be the perfect complement to his scrappy US Airways, where ‘we sometimes fire before we're ready.’”

“As he seeks $1 billion in new revenue and savings, he plans to smooth technology bumps by using the reservation system at AMR’s American, the bigger airline, and has union accords in place to ensure labor peace and predictable costs,” observes Bloomberg’s Mary Schlangenstein.

“They are in a good position,” Raymond James Financial analyst Savanthi Syth tells Schlangenstein. “That’s not to say they won’t have any hiccups, but they have their own merger experience and they’ve watched what’s worked and hasn’t worked for others. They will be a formidable competitor.”

The Chicago Tribune hailed the merger. “The two airlines might have limped along for some time as weak competitors to United-Continental and Delta-Northwest,” it pointed out in an editorial published this morning. “With the merger, the industry has a third strong competitor with the network and scale to give it staying power.”

Southwest is another major competitor, and there are also seven smaller carriers operating in the U.S.: Alaska Airlines, Allegiant Air, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Spirit Airlines and Virgin America, Kate Rice reports for Travel Weekly.

“There are 10 jet airlines out there — that’s all that’s left,” Michael Boyd, president of Boyd Group International tells Rice (who points out that Boyd considers Allegiant a travel company, not an airline). “They have their own strategies; they are not trying to compete with each other and take over each other’s turf.” 

The integration of American and US Airways is expected to play out over 18 to 24 months, Andrea Ahles reports on Star-Telegram.com, and it will be, for the most part, delayed until after the holiday travel season is finished. 

“The new leadership for American will need to be good listeners. They will need to ask the right questions,” Hudson Crossing airline analyst Henry Harteveldt tells Ahles. “American has a terrific opportunity to proceed and win, but they have to want to win. They have to do what’s needed.”

Operationally, American has been on “a very reduced schedule to and from” its home base, Dallas/Fort Worth International Airport, over the weekend due to the winter weather conditions, the AA website informs us even as it promises a “new level of comfort, connectivity and convenience.” 

As for US Airways, the AP’s Koenig laments that it joins “Continental, Northwest and other airlines that now exist only in the memories of employees and longtime travelers.” That would include such colorful and storied nonflying brands as Braniff, Pan Am, Trans World, Eastern and the dodo — indeed, the latter seems to be the likeliest of all to make a comeback.

1 comment on "American, US Airways Merger Takes Off Today".

  1. Paula Lynn from Who Else Unlimited
    commented on: December 9, 2013 at 9 a.m.
    So when they calculate inflation, this doesn't count. The only people who won't feel it directly will those who do not go anywhere for any reason. All the rest of us will be taking a big hit. Follow the money.

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