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December 31, 2013

No. 1 American Airlines and US Airways merge to form world’s largest airline

AMERICAN_US_AIR_18_25124197It was a December wedding for American Airlines and US Airways.

The airlines, which announced their intent to merge on Valentine’s Day this year, closed the deal Dec. 9 with silver bells ringing in celebration at American’s Fort Worth headquarters.

Now comes the difficult task of integrating the two airlines with 100,000 employees and 1,500 aircraft into one, a long and complicated process likely to take two years.

American’s new CEO, Doug Parker, who previously ran US Airways, said the goal is to restore American to its spot atop the industry.

“Being the greatest airline in the world means that we want to be the airline that customers want to fly, where employees want to work and where investors want to invest their dollars,” Parker told employees at the headquarters celebration this month.

The engagement, however, was almost derailed over the summer as the U.S. Department of Justice filed an antitrust lawsuit to stop the merger.

But before the Thanksgiving trial was scheduled to start, the two sides settled in early November with American agreeing to divest takeoff and landing slots at New York LaGuardia Airport and Washington D.C.’s Reagan National Airport, as well as gates at several other airports.

“We could have either settled or taken our chances in court and we chose to settle and get it done,” Parker said.

The settlement was approved by U.S. Bankruptcy Judge Sean Lane, and American exited bankruptcy Dec. 9 and closed its merger with US Airways. The new company, American Airlines Group, began trading on the Nasdaq exchange that day under the ticker symbol AAL.

Since the airlines joined merged, customers have yet to see many changes. Executives decided to wait until after the busy holiday season before implementing anything new.

“The silver lining to the DOJ lawsuit was that it allowed us to get further advanced on integrating more from a customer perspective,” said American’s new president, Scott Kirby. “We’ll now have a more automated integration for customers closer to the close of the merger than we would have before because there wasn’t going to be time to get it done.”

American Airlines NASDAQ 03Starting Jan. 7, frequent fliers in the AAdvantage and Dividend Miles programs will have reciprocity, meaning customers can earn and use miles on either American or US Airways flights regardless of which program they belong to. The new carrier also expects that elite frequent fliers will have access to both Admirals Clubs and US Airways Clubs by spring.

And by the end of the first quarter, the company expects to offer code sharing on flights for both airlines, allowing travelers to buy a ticket for an American flight using the US Airways website and vice versa. US Airways will also leave United’s Star Alliance and join American’s oneworld group of international carriers.

“What we’re trying to do is come up with a very well-thought-out, thoroughly examined list of initiatives that we will be addressing over time,” Isom said.

Although the executive team signed transitional agreements with some of the airlines’ labor groups, American will have to deal with quite a few union issues next year.

Pilots, flight attendants, mechanics and other groups will have to decide which union they want to represent them in contract negotiations with the new company. The International Association of Machinists, which represents US Airways mechanics and fleet service workers, has not been supportive of the merger, saying members needed a new contract before merging with their counterparts at American, who earn higher wages.

“There will be some bumps in the road and there will be some time spent in court,” said Bill Swelbar, an airline researcher at the Massachusetts Institute of Technology. “But I believe that they’ve done a pretty good job of trying to head off as many of the hiccups through their union negotiations that have taken place thus far.”

Employee policies will also have to be aligned: choosing holidays and vacation time and migrating e-mail systems, among other issues.

But for now, Parker and the new executive team at American are reveling in having created the world’s largest airline.

“This was all about an effort of trying to get our airline in position to be successful and allowing our employees to work for an airline where they knew they could build their careers and know the airline was going to be there for them as they built their careers,” Parker said. “It feels really good to accomplish that.”

-Andrea Ahles

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Comments

mary jo ryan bordonaro

We have flown Us airways for 16 years going to Aruba. We live in Cleveland and we were a Continental hub. now we are united. The difference in customer friendly is devastating. United has call centers in India and Phillapines that is horribly, Can't understand them and they are not service oriented people.
Please don't do that. You have been a sterling company for all the years we have traveled with you Your phone agents are kind and accommodating. Flight stewards and stewardesses are the best.
Hope you won't change your customer friendly attitudes.
We are extremely disappointed with United as they are major hub in Cleveland. Service, treatment of customers and even flight attendants are no comparison to what Continental was.
Hope you stay FIRST CLASS in the business
Mary Jo Ryan Bordonaro
We are hopefully flying out tomorrow to Charlotte

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