Would a US Airways-American Airlines merger be good for travelers?

By | May 4th, 2012

Will this merger really be a "win-win"? / Photo by Peter Ashton - Flickr
If it happens, the expected union of US Airways and American Airlines could be one of the last big legacy airline mergers. Maybe even the last one.

Together, the two companies would create the largest airline in America as measured by number of employees, and the second-largest in terms of operating revenue.

But forget the “if” for a moment. A more important question, as far as passengers are concerned, is: Should  it happen?

Just after US Airways announced last month that it had the backing of key employee unions at American Airlines, Kevin Mitchell of the Business Travel Coalition called on the Transportation Department to conduct a thorough analysis of past airline mergers and their outcomes.

His organization, an advocacy group for corporate travel interests, has testified before Congress against several previous consolidations. Mergers, Mitchell says, have allowed some airlines to “ignore the demands of their most valuable customers.”

The US Airways-American hookup is by no means a certainty. So it may be too soon to sound the alarm bells, but not by much. The next chapter in the process is a bankruptcy court hearing, scheduled for next month, in which a judge will determine whether American’s current management has the right to discharge the company’s labor agreements.

No one knows when an actual merger plan would be announced, although it seems clear that US Airways wants it to happen as soon as possible. The Justice Department is responsible for determining whether a US Airways-American combination should be challenged on competitive grounds, with the Transportation Department and the Federal Aviation Administration typically advising the agency. If the DOT has compelling evidence that airlines didn’t keep their promises in past mergers, it could effectively block the deal. But either way, it would be highly unusual for the government to conduct any kind of study before a deal is announced.

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A DOT spokesman declined to comment, and representatives of US Airways and American wouldn’t answer questions about the merger beyond their prepared statements.

But the way many air travelers see it, we don’t need any studies to determine whether the merger is a good idea. Most of those I’ve talked to, pointing to the dismal quality of domestic air travel today, say that it’s not.

“There’s less and less competition in the airline industry with all the mergers,” says MaryHelen Maupin, a travel agent in Nashville who has had a front-row seat to every airline combination since deregulation. “One thing’s for sure: It ruins customer service and employee morale.”

Seth Miller is an air-travel blogger who’s closely following the proposed merger. Based on previous carrier consolidations, he says, he expects two results from this one: “fewer choices and higher fares.”

“There’s not a single positive aspect of the merger for consumers,” he says. “At least none that I can see.”

But Michael Miller, vice president of strategy for the American Aviation Institute, a Washington-based think tank, says that the benefits of such mergers are invisible to most passengers. When Delta Air Lines and Northwest Airlines combined in 2008, he says, the process was “seamless” and made sense from an operational perspective. The new airline had a commanding presence in Asia and South America, and its network now serves international customers better. When airlines become more competitive, they become more profitable and reliable, which helps consumers, he says.

But he adds that not all mergers have that result: Customers have yet to benefit from the recent Southwest Airlines union with AirTran, a mash-up of two airlines with different corporate cultures and routes.

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How would US Airways-American stack up against past airline mergers? It may be too soon to tell. But some of the numbers are troubling, at least when it comes to customer service. Take the latest scores from the University of Michigan’s American Customer Satisfaction Index, which weighed data for six major airlines in 2011. American Airlines earned 63 out of a possible 100 points, just ahead of US Airways, which tied for second-to-last place with a score of 61. Only Delta, with a 56, scored worse. If the airlines maintain their level of performance after a merger, a combined US Airways-American is likely to be the most-complained-about air carrier in the country.

If the government steps in and denies the couple a marriage license, would consumers be better off?

I’m leaning toward yes. I can’t think of a single airline merger that resulted in happier customers or employees, and for that reason alone, I’d cast a vote against the deal. (Not that it’s up to me.)

But I can also remember a time in the not-too-distant past when American Airlines represented the gold standard in customer service. In 1995, before the carrier fell in love with fees, its American Customer Satisfaction Index score of 71 was just a few points lower than that of service-leader Southwest. I think that under the right management, it can reclaim some of its lost luster.

You may feel powerless to do anything as the merger drama unfolds. But you aren’t. Where you still have a choice in airlines, you can buy a ticket on a carrier that treats you with dignity. And you can tell your elected representatives that you expect more from your government than a rubber stamp on this deal. In an election year, they might listen to you.

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Even if the regulators mishandle this merger, they’ll probably have another chance before long. Because this probably won’t be the last airline merger ever. Says the American Aviation Institute’s Miller, “There will always be mergers and acquisitions in aviation.”

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