Is an American – US Airways merger good for air travelers?

By | January 13th, 2013

us airways 5The long-rumored merger between American Airlines and US Airways appeared to move a step closer early this month when Tom Horton, American’s chief executive, announced that the two carriers were in “discussions” and that a decision would be made “within a matter of weeks.”

A combination of American, which is expected to emerge from bankruptcy protection early this year, and US Airways would create the nation’s largest airline as measured by number of employees, and the second-largest in terms of operating revenue. It would also complete a cycle of industry consolidation that has defined the past decade in commercial aviation, with Delta Air Lines merging with Northwest Airlines, Continental Airlines joining United, and the latest corporate coupling between Southwest Airlines and AirTran, among several others.

Neither American nor US Airways would comment for this column, citing nondisclosure agreements relating to a possible merger that each has signed. But Aaron Gellman, a professor of transportation at Northwestern University, says he believes that the two parties remain a long way from an agreement, and that ultimately, a deal will happen only “if Wall Street wants it.”

Faced with the prospect of yet another airline merger, passengers didn’t mince words. “Bad plus bad equals bad,” said Lazaro Fuentes, the co-founder of a software developer in New York.

A closer look at both airlines’ performance since I wrote about the possible combination last spring illustrates Fuentes’s frustration. For the first nine months of 2012, a combined total of 1,918 complaints were lodged against American and US Airways with the Transportation Department, which would have made an airline composed of the two the second-most-complained-about carrier behind United Airlines.

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Complaints to the DOT represent only a fraction of overall grievances related to a carrier. The numbers are virtually the same as in 2011, when a merged airline would have had the distinction of being the most-complained-about air carrier in the United States.

Travelers like Candi Kruse, who works for an electronics manufacturer in Allentown, Pa., say they’re concerned that these two underperforming carriers will drag each other down further, not unlike what happened after Continental and United merged, leaving customers with a worse airline than before. Kruse thinks that US Airways’s service has steadily improved, but she is unimpressed with American, which, she complains, flies “ancient planes” and subjects her to “bad flight experiences.” If the two airlines become one, Kruse says, she will shift her Gold-level loyalty with US Airways to another airline.

By other measures, a combined airline wouldn’t be that awful. For the first nine months of 2012, US Airways placed fifth and American seventh in the lost-luggage rankings. Together, they misplaced 224,402 checked suitcases, according to the DOT. That’s just over two bags per 1,000 customers, putting them in the middle of the flock in terms of performance. They also rate so-so in the denied-boardings category, turning away only 0.73 passengers per 10,000 — a respectable number.

Other passengers see the benefits of a deal. Jason Carns, a physician based in Phoenix and an American Airlines frequent flier, says that a combined airline would offer him more flight options, and maybe the ability to earn miles through more international airlines. “Overall,” he says, “I am very much in favor of a merger.”

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Jay Bryant, a vice president for a digital media company in Grovers Mill, N.J., also says that he looks forward to a possible corporate marriage. “I would love to see a merger,” he says. He’s located halfway between the Philadelphia and Newark airports, and after the merger between United and Continental, he was forced to fly through Newark. He would prefer to use US Airways’ hub in Philadelphia.

A merger, while by no means a certainty, is “getting closer,” says Michael Miller, vice president of strategy for the American Aviation Institute, a Washington-based think tank. And both the critics and the supporters make a valid point, he adds. “Consumers will benefit because their frequent-flier miles will be applicable to a much larger network, with more diverse offerings,” he says. “But as with other mergers, flights will be cut and competition will wane. This will mean higher prices for the average flier. But a more stable airline industry also will mean more reliable travel and less turmoil and bankruptcy.”

So what will happen next, and what should you do about it? It depends on which airline you’re flying. US Airways customers will see little, if any, change in the near term, even if the merger moves forward. American Airlines customers will continue to experience the same turmoil as before, including added and dropped routes, new policies and program changes, as the carrier struggles to right itself after exiting bankruptcy.

In the long term, if the airlines decide to combine, things could get dicey, predicts Northwestern’s Gellman. “You’d have higher prices and less innovation,” he says. And entire hubs could eventually disappear. A combined American-US Airways might have to choose between closing its Philadelphia and New York hub — Gellman says it would probably shut down Philadelphia — and it would reduce the size of its operations in Phoenix, where US Airways is now based. “American and US Airways are better off alone,” he adds.

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Doug Parker, chief executive of US Airways, would probably beg to differ. In a speech at the National Press Club last summer, he vigorously defended his company’s desire to merge, arguing that customers would be among its biggest beneficiaries. “Customers will gain more flight options at better times, to more places,” he says. “And whenever two airlines combine, they open the communities that they serve to many more travelers.”

Whether such an airline will also offer the kind of customer service that passengers expect is a question some air travelers hope they’ll never have to answer.

Is an American - US Airways merger good for air travelers?

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