AIRLINES: American pulls the pin

American Airlines' new livery on their new Boeing 777-300ER airliners.
American Airlines’ new livery on their equally new Boeing 777-300ERs. How do you like the new look? | Image courtesy of American Airlines

American Airlines appears set to emerge from Chapter 11 bankruptcy as the largest airline in the world — and the property of US Airways. What this bodes for the traveling public remains to be seen.

Some time today in Dallas, a bunch of business executives from American Airlines and US Airways will make official what we already know, that the two companies are merging to form the world’s largest airline company.

But it’s hardly a marriage of equals. American will keep its name and identity — for now, anyway — but it will be run by USAir’s boss, which makes it pretty clear which company is the shotcaller in this relationship.

The reason is equally clear. USAir is making money, while American has been losing so much of it that it had to seek Chapter 11 bankruptcy protection.

Simply put, American is agreeing to this deal because it has to, while USAir is doing it because it can.

You can find more details about the merger in this Associated Press story here.

Thomas W. Horton, American’s chairman and CEO, sent out an email blast today to American’s AAdvantage frequent-flier program members, which read in part:

“As a combined carrier – the new American – we will have an expanded network to even better match where customers want to fly and enhanced ability to invest in our fleet, modern technologies, and the products and services our customers value most.

“We’ve been making progress toward building a new American – from transforming our fleet with the largest aircraft order in history, to modernizing the travel experience, and refreshing our iconic brand. This merger is our next step in the process of building the leading global airline.

“Together we will offer our customers more than 6,700 daily flights to 336 destinations in 56 countries by maintaining all the hubs currently served by both airlines.

“…we will provide more options than any other airline across the East Coast and Central U.S. regions, and expand and further strengthen our network on the West Coast. The combined airline will add to our reach across the Atlantic and Pacific and bolster American’s industry-leading position in Latin America and the Caribbean. We’ll also enhance our existing loyalty program benefits through expanded opportunities to earn and redeem miles across the combined network.

“At this time, American and US Airways will remain separate companies and you can continue to count on American for excellent service and safe, reliable travel. We expect the merger to be completed in the third quarter of 2013 and will keep you updated.”

The AP says this deal has been brewing since last August, but regular IBIT readers know that the merger of American with one or more of its competitors has been in the cards — and in the works — for a lot longer than that. The only questions were who American’s dance partner would be, and when.

Over the last year and a half, it looked as if it might be Delta or United. But Delta, having already absorbed Northwest five years ago, apparently lost interest and United snapped up Continental instead, which pretty much cleared the field for USAir.

In the airline biz, though, today’s shark is often tomorrow’s guppy, especially in the United States. Since the 1970s and especially since Washington deregulated the airline industry in 1978, at least 20 once-familiar names have either merged with other carriers or vanished altogether from American skies:

  • Air West
  • Air California
  • America West
  • AirTran
  • Continental
  • Eastern
  • Jet America
  • National
  • Northwest
  • Ozark
  • Pan Am
  • People Express
  • Piedmont
  • Pacific Southwest
  • Reno Air
  • Republic
  • Texas International
  • TWA
  • ValuJet
  • Western

To many of you, most of these are just names from an increasingly dim aviation past, but some of us are old enough to remember flying with a lot of these outfits.

One of the arguments used to sell airline deregulation back in the day was that it would lead to greater competition within the industry, and thus better prices for consumers. What part of the above looks like greater competition to you?

George Hobica, founder of the site, doesn’t think the American-USAir merger will be all that bad for consumers. His is a hopeful voice:

“Fares won’t increase all that much, if at all. If airlines have learned one thing, it’s that people stay home, drive or video-conference if fares go too high. Most air travel is discretionary, not “must do.”

“If fares on certain routes do go higher, that will make it more profitable for competitors to step in and lower fares once again. Yes, fares on “duopoly” nonstop routes (those where only US and AA fly nonstop, such as Dallas DFW-Charlotte, Philadelphia-Miami) may go higher at first, but that will open the door for VirginAmerica, JetBlue or another carrier to step in profitably. In fact, once the airline industry becomes consistently profitable, we may see another JetBlue enter the fray.”

You can read the entire text of George’s views on the Huffington Post here.

I don’t know. When was the last time you as a consumer saw airline fares drop to any great degree?

The number of add-ons fees being charged these days allows the airlines to play a kind of shell game with passengers by claiming their base fares are super-low, but by the time you’ve shelled out money for those fees, are you really paying less to fly these days, or more?

It’s true that newer, more fuel-efficient planes will allow American to cut their fuel costs, albeit at the expense of retiring those MD-80 jets with the two-seat side that passengers love — but what are the odds that those or any other savings will actually translate into lower base fares or the elimination of a single one of those extra fees?

IBIT says: For good reason, George Hobica is one of the most respected observers of the airline industry, so he may well be right — and we all need to hope that he is. But recent industry history suggests that’s not the way to bet.

AIRLINES: The end of American?
AIRLINES: M is for merger
AIRLINES: US Air moves on American
AIRLINES: AA takes the straight and narrow
AIRLINES: American heading for bankruptcy?
You’ve gotta hand it to AA — every way possible!


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