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.

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.”

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.

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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  • crash025

    Absolutely not. United won’t be able to pass on flyers, whom they aren’t able to route, to US Air anymore.. American flyers may get more options, but I can’t help but see many of the AA gates be closed down. The AA gates in CLT will be empty. There will be less competition for everyone.

  • badav60

    A confederacy of dunces ????

  • TonyA_says

    OFF TOPIC. Why does this site go down every early morning?
    Some kind of database connection problem.

  • We moved to a new server last week. It’s been a real challenge, because there are people out there who want to take this site down and have bots and other malicious code designed to do so. My web guy is working on fixing it. I apologize for the down-time. We’ll get this taken care of soon.

  • $16635417

    What are the other options besides a merger?

  • backprop

    You might want to get more than a “web guy” involved. This site is (usually) travel-related. I recommend the TSA. It’s slightly tangential to their mission, but that’s never stopped them before.

  • Kairho

    Please, don’t give them any ideas!

  • They would never do that … on second thought, maybe they would?

  • As an AA loyalist, no I’m not looking forward to a merger. Does anyone really think two airlines whose pilot unions haven’t been able to play nice in years will somehow magically merge and all will be happy? US Airways still hasn’t sorted out the pilot mess from their last merger.

    And, despite assurances to the contrary, I have no doubt that the “new” AA will just be downgraded to the US Airways product. Not that AA is particularly great, either. Plus, while I know you hate FF programs, Chris, one of the few good things going for AA is AAdvantage, which keeps a fair number of folks flying with AA. I can all but guarantee the program will be gutted in a merger, leaving me no particular reason to stick around for the higher fares and lower service levels that will result from the merger, not to mention the inevitable teething problems a la UA/CO. Guess I’ll be cashing out my miles and heading to Southwest.

  • Alan Gore

    This deal reminds me of the proposal floated during the 2008 financial crisis, which was that every failing bank be amalgamated into a single “US Bad Bank” that could then be carefully liquidated to protect the economy as a whole.

    So let’s amalgamate all the crappy legacy carriers into one US Bad Airline, take it Chapter 7, and let Jet Blue and Southwest snarf up all the usable equipment. Then we eliminate the cabotage laws, so that high-quality foreign airlines can give the domestic carriers some needed competition.

  • Bill___A

    I’ve never flown US Airways and haven’t flown AA in years so it isn’t an issue for me. They can do what they want.

  • Bill___A

    Maybe oneworld and star alliance should merge too.

  • CubsFan

    After to moving from Chicago to Philly a few years ago, I have to say that US Air’s FF program has been surprisingly good. We’ve been able to book international award travel literally every year with little issue. It has actually been easier that when I was primarily using AA from ORD. I actually have high hopes for a merged FF program.

  • crash025

    I would like that. With BMI going away, there aren’t any good *A members in the UK.

  • Bill___A

    I wasn’t thinking of that, but you are most certainly correct. The disappearance of BMI has caused a huge hole in available flights for Star Alliance to, from, and around the UK/Europe.

  • Helio

    If TSA is involved, a popup will show asking to disconnect the mouse prior accessing the website, and to run a mandatory check in your computer. Some folks will need to disconnect the keyboard too.

    If you refuse to disconnect the mouse or run the check, a chat window will open and you will be put in hold for a long time, waiting for an agent to manually allow you to access the website (after insisting to you to disconnect the mouse and run the test to speedup the access)

    Of course Chris won’t be able to post anymore, because he will be always in the chat hold.

  • TonyA_says

    codeshare, lol :-)

  • garydpdx

    Strategic investment by US into AA, making the latter a subsidiary. That way, US can keep on fixing its own issues between America West and old US Airways staff without adding AA people into the mix as well.

  • Extramail

    Funny that I’m sitting here in the Philly airport, as I have been since 6 a.m., trying to get a flight out of here. Granted the weather isn’t great but did U.S. Airways really have to bring a plane to our gate, FINALLY, at 3 p.m., line us up and then CANCEL the flight? I wish someone could give me a reasonable explanation for why you have to lie to me and string me along but REALLY? Bring a plane to the gate, tell us we’re boarding and, then, surprise, this isn’t your plane. I do understand they don’t want to share revenue with another carrier but I just ask that you be honest with me!

  • $16635417

    Would they keep redundancy, such as routes, in a subsidiary?

    The American name is more valuable, I would think they would prefer to keep the AA name on the new airline.

  • $16635417

    Another plus for codeshares! (?)

  • Big Horn Kid

    Eliminating the cabotage laws, and doing nothing else, might cause the legacy carriers to clean-up their act.

  • Joe Smith

    What will happen to my miles?

  • wandering_j

    About bad+bad = bad … I’ve had no problems recently with US Airways or United/Continental. And my last spat with American is well in the past. I genuinely like air travel, even if some of the pre-flight stuff diminishes the effect.

    If it means better intercontinental flights options from Phoenix, I’m all for it.

  • garydpdx

    I’m a United flier (disclaimer up front) and it has gotten a lot harder to book US codeshare flights on through (e.g.) CLT or PHL. Moving US to OneWorld with AA (merger, purchase or subsiditary) would bring a new set of passengers and possibilities. Also, there was once an America West/BA cooperation agreement at PHX and that could come back.

  • garydpdx

    The US-AA proposal makes the same argument on minimal overlap in routes that we have seen with the DE-NW and UA-CO mergers. As a United flier, I have seen more connection options on mult-leg excursion itineraries.

    Also, most speculation has the new merged entity taking the AA name.

  • Chris Johnson

    Correct me if I’m wrong but aren’t USAirways and American part of different airline alliances (Star Alliance and One World) ? If that’s the case, I would think that DOJ Antitrust wouldn’t allow a merger. Of course, I’m not an expert on this and have been wrong before. It can’t be good for consumers in any case. Less competition always means higher fares. Large numbers of employees on both airlines will lose their jobs as well, as duplicative positions are eliminated. Quality will not improve with a merger either.

  • Philip Brown

    I apologize as this is “Off topic”; but I am trying to access a similar compilation of issues with Spirit Air – can’t seem to navigate Chris’s site to do so.
    Any help would be greatly appreciated; Chris is worth his weight in GOLD!
    Muchas gracias,

  • oldft

    …bad+bad=worse! They will eliminate all competition for largest, and, for sure, for worst!

  • ArizonaRoadWarrior

    My concern is that the merged airline will belong to the OneWorld Alliance instead of the Star Alliance. I have flown on British Airways and Cathay Pacific but I think that the airlines of the Star Alliance are better when it comes to international flights.

  • GlobalTraveler

    American Airlines is the worst airline. After extremely bad experiences my friends and I had, we have decided NEVER TO FLY with American Airlines again. It will better if AA goes bankrupt and is broken into several new airlines which are emerge as customer friendly airlines.

    I do fly US Airways but they do not provide good experience either. FTC should not let this merger happen. It is against the interests of the consumers. Let AA go bankrupt and assets sold off so that new airlines emerge.

  • India

    I’m not looking forward to AA and US merging, i’m kind of a frequent flyer. I fly US Airways all of the time. I thing they’ll do better standing alone. Their conditions has improved over time, so i’m against the merging.