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American Airlines on Final Approach to US Air Merger

American Airlines on Final Approach to US Air Merger

 

For American Airlines and its supporters, it’s been a long, strange trip, from the industry’s preeminent carrier to a bankrupt also-ran, with unmoored seats and a murky future.

The airline took an important step toward solidifying that future on Friday with the ratification of a new contract by its pilots union. That’s the last of its unionized groups to approve employment agreements that will put the cost side of American’s operations at parity with other major airlines’.

With the contentious labor negotiations behind them, American’s management team can focus on the next step: evaluating the company’s post-bankruptcy options and making the case with creditors and the bankruptcy judge for either a merger or a stand-alone future.

The following excerpt from a letter American chief Tom Horton sent to employees following the finalization of the pilot negotiations gives a clue as to the current state of the airline’s thinking:

As we bring our restructuring to a close, we are also completing our review of strategic alternatives. As you know, we have been evaluating the merits of a combination under a non-disclosure agreement with US Airways. While we are confident the new American will be very strong, we are evaluating whether such a combination could create value for our owners and a positive outcome for our people and our customers. We expect to have a conclusion on this soon.

To anyone who has followed American through the bankruptcy process, the tone and content of the letter will stand in sharp contrast to American’s very public antipathy toward a merger when US Airways first proposed it.

Initially, American flatly rejected any notion that a tie-up with US Airways was part of a viable future. That position softened gradually over the ensuing months, with American in August signing a non-disclosure agreement with US Airways that allowed for data-sharing between the two carriers.

And now, at a critical point in the restructuring proceedings, it would appear that the merger scenario is uppermost on the minds of American’s top managers.

The leadership group at American that gave us SAAver fares, hub and spoke networks, and the AAdvantage frequent-flyer program are long gone. And their successors have much to atone for, including delaying restructuring in bankruptcy, a tactic that was proved not only viable but necessary by United, Delta, Continental, Northwest, and US Airways.

US Airways, on the other hand, is solidly profitable.

But for all its recent missteps, American has managed to retain substantial goodwill from its customers.

And in spite of its relatively strong financial performance, US Airways is more likely to be lambasted than lauded by travelers.

A consideration of the pros and cons of the alternatives has left many of American’s customers dreading the prospect of a US Airways takeover and convinced that American, in its last and greatest mistake, will be a willing merger partner.

It looks increasingly likely that such concerns are justified.

Reader Reality Check

A US Airways-American merger: Yay or nay?

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  • garydpdx

    Since US is still having problems integrating the old America West and old US Airways, maybe a strategic investment in AA like Delta’s 49% in Virgin (formerly Singapore’s share) is the better way to go, at least for a start.  Combining US and AA does make sense, especially in combination with BA and WJ (Canada).  US is also better off moving to OneWorld, in any event.

  • garydpdx

    Since US is still having problems integrating the old America West and old US Airways, maybe a strategic investment in AA like Delta’s 49% in Virgin (formerly Singapore’s share) is the better way to go, at least for a start.  Combining US and AA does make sense, especially in combination with BA and WJ (Canada).  US is also better off moving to OneWorld, in any event.

  • http://twitter.com/schmeeps Eric

    Nay!  I like US Airways, and I don’t want it to leave Star Alliance!

  • http://twitter.com/schmeeps Eric

    Nay!  I like US Airways, and I don’t want it to leave Star Alliance!

  • rmswift

    I’ve been platinum or Chairman’s Preferred on US for the past 5 years. Overall, I’m quite pleased with their service. It’s a good airline. Is it a perfect airline – no- but no airline is. I fly a lot on other airlines as well and they all have their issues. I’m most impressed with how much US has improved over the past 2-3 years after US management realized that you can’t totally sacrifice service and amenities to reduce costs, without reducing the number of passengers who want to fly your airline.
    I don’t look forward to the post-merger chaos, however. The merger between US and America West didn’t go entirely smoothly, nor did the merger between CO and UA. A merger will cause temporary chaos for both AA and US. I also won’t like leaving the Star Alliance. But it looks like bigger is the business model that works, so I have to go with the flow.

  • rmswift

    I’ve been platinum or Chairman’s Preferred on US for the past 5 years. Overall, I’m quite pleased with their service. It’s a good airline. Is it a perfect airline – no- but no airline is. I fly a lot on other airlines as well and they all have their issues. I’m most impressed with how much US has improved over the past 2-3 years after US management realized that you can’t totally sacrifice service and amenities to reduce costs, without reducing the number of passengers who want to fly your airline.
    I don’t look forward to the post-merger chaos, however. The merger between US and America West didn’t go entirely smoothly, nor did the merger between CO and UA. A merger will cause temporary chaos for both AA and US. I also won’t like leaving the Star Alliance. But it looks like bigger is the business model that works, so I have to go with the flow.

  • http://www.facebook.com/edgar.numrich Edgar Numrich

    Am surprised no one claims the legacy carriers’ problems are forever grounded in the 47%.  Southwest and a few copycats more-or-less figured it out some time ago:  a flying bus with peanuts, an onboard staff that smiles, and cracker-jack air and ground crews not given to just sucking their thumbs. 

    Mega-combinations will prove to be just kicking a bigger can down the road.  Thank goodness you can still get to Europe by boat ~ at great prices where there truly is no “coach steerage”.  

  • http://www.facebook.com/edgar.numrich Edgar Numrich

    Am surprised no one claims the legacy carriers’ problems are forever grounded in the 47%.  Southwest and a few copycats more-or-less figured it out some time ago:  a flying bus with peanuts, an onboard staff that smiles, and cracker-jack air and ground crews not given to just sucking their thumbs. 

    Mega-combinations will prove to be just kicking a bigger can down the road.  Thank goodness you can still get to Europe by boat ~ at great prices where there truly is no “coach steerage”.  

  • http://www.facebook.com/profile.php?id=13806765 Thom Furey

    Give it 20 years…. it will all be one airline.

  • http://www.facebook.com/profile.php?id=13806765 Thom Furey

    Give it 20 years…. it will all be one airline.

  • alawrencenyc

    Ex.Plat on AA and I find it to be very comfortable for a busy traveler.  The reviews of US’ mileage program are not as kind.  I vote ‘nay’.

  • alawrencenyc

    Ex.Plat on AA and I find it to be very comfortable for a busy traveler.  The reviews of US’ mileage program are not as kind.  I vote ‘nay’.

  • http://www.facebook.com/ruth.morrow.259 Ruth Morrow

    I certainly hope there is no merger.  Should there be a merger, I hope that the American Airlines frequent flyer program is retained.

  • http://www.facebook.com/ruth.morrow.259 Ruth Morrow

    I certainly hope there is no merger.  Should there be a merger, I hope that the American Airlines frequent flyer program is retained.

  • http://www.facebook.com/paula.reid.777 Paula Reid

    Definitely NAY!  American is my second airline of choice (behind Southwest – it’s a baggage fee thing) and US is at the very bottom.  Service, flight experience, etc., I’ve had nothing good to say about US.

  • http://www.facebook.com/paula.reid.777 Paula Reid

    Definitely NAY!  American is my second airline of choice (behind Southwest – it’s a baggage fee thing) and US is at the very bottom.  Service, flight experience, etc., I’ve had nothing good to say about US.

  • http://www.facebook.com/profile.php?id=1426396989 Vicki Shouse

    Nay on merging with US Airways.  Although I have never flown with them, all of my friends who have have walked away saying “never again”.

  • http://www.facebook.com/profile.php?id=1426396989 Vicki Shouse

    Nay on merging with US Airways.  Although I have never flown with them, all of my friends who have have walked away saying “never again”.

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