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January 28, 2013

Is American-US Airways merger ready for takeoff?

Will they or won't they?

After months of courting, the time is drawing near for American Airlines to decide whether to pursue a merger with US Airways, a deal that would have vast consequences for employees, travelers and the region.

With close to 100,000 employees, 1,500 aircraft and $38.7 billion in revenue combined, a marriage of American and US Airways would once again make Fort Worth home to the nation's largest airline.

More passengers would likely connect through Dallas/Fort Worth Airport, headed to other domestic destinations or across the oceans to international cities.

A beefed-up presence in New York would attract business travelers to its larger domestic network. East Coast passengers would have their pick of hubs up and down the seaboard, from Miami to Charlotte, N.C., to Washington, D.C., to New York.

Most importantly, analysts say, the new American would compete better with the two top dogs, United Airlines and Delta Air Lines.

But the proposed deal is not a slam dunk.

American's parent company, AMR Corp., and creditors are still mulling over whether to proceed with a deal while the carrier is in bankruptcy. Questions remain about how much equity in the new company would go to American creditors and US Airways shareholders.

And there's a debate over which CEO -- American's Tom Horton or US Airways' Doug Parker -- should run the company.

By unveiling its new livery and brand two weeks ago, American's management signaled that it would rather emerge from bankruptcy as a stand-alone carrier and pursue a merger later, some say.

American's unions, which hold three of the nine seats on the unsecured creditors committee, continue to support a merger, as they have since April.

And it appears that Jack Butler, the committee's general counsel, has been facilitating meetings between the carriers for the past few months.

American and US Airways declined to comment on closed-door merger discussions. Horton indicated this month that a decision could come "within weeks," but it remains unclear whether a merger will be announced by early February or a decision will be pushed into the spring. American has asked the Bankruptcy Court to extend its deadline until late April to submit a reorganization plan.

Analysts say a combined American-US Airways would be bigger and in some ways better than either airline can be on its own.

"US Airways has always been a very scrappy operator, and American has been able to reduce its costs, so it will be interesting to see what will happen if they combine," said Henry Harteveldt, a travel industry analyst at Hudson Crossing.

To read the full article that appeared in Sunday's Star-Telegram, click here.

-Andrea Ahles


Read more here: http://www.star-telegram.com/2013/01/27/4577863/is-american-us-airways-merger.html#storylink=cpy

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Comments

Marc

The quoted statement "US Airways has always been a very scrappy operator" is way too far from today's reality...US Airways has topped the big US 5 the last 4-5 years with being inconstantly either first or second after Delta last 3 years in the main operations performance metrics (OTP, baggage and costumers complaints)

casual observer

US has been a "scrappy" operator. Don't you remember when America West and US merged, Doug Parker was keen on reinventing the carrier as a low cost alternative to SW? Quoting Parker, merging America West and US Airways will create "the nation's first full-service airline with the customer-friendly pricing structure of a low-fare carrier."

Parker has also turned a profit of late because he saw fit to pay his segregated employee groups "low-fare" wages as well. Pretty "scrappy" wouldn't you say?

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