My Thoughts on an American and US Airways Merger

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There’s a lot of buzz going around the internet about a potential American Airlines and US Airways merger, like this Consumerist piece, because someone apparently bought up a bunch of domains related to a AA/US merger.

I don’ think this necessarily means anything – in this day and age of cheap domain names, it would make sense to snatch up a bunch of relevant names even if the deal wasn’t close to being done. However, I’ll discuss my thoughts on a potential merger and how I think it would affect those with miles.

An Uphill Battle
I’m not an airlines analyst, so I won’t pretend to expertly break down all of the current issues that both American and US Airways are having with their labor forces, but to put it lightly – there are a lot of issues and more to come as American finds ways to slash their costs and restructure. Would merging with US Airways, who is still dealing with labor issues from their merger with America West, be a smart move? Probably not, but that’s never stopped airlines in the past. While American lost millions in 2011, US Airways actually turned a profit of $111 million in 2011 so not everything is going wrong there. They’ve even admitted retaining Barclay’s Capital to explore the option of buying American Airlines.

The bottom line is that both American and US Airways are going to face a long, uphill battle competing with new mega airlines Delta (who recently merged with Northwest airlines) and United (who just officially merged with Continental). Delta saw profit and 2011 and is optimistic about 2012. I think United will be on  the same path once they start realizing the benefits of the merger and they get through the current hiccup phase of integration.

Which Alliance?
If US Airways and American merged, my guess is that they’d have more to gain by staying in the Oneworld Alliance and building on existing joint ventures with British Airways and Iberia, as well as creating a stronger Asia presence with Japan Airlines and Cathay Pacific. US Airways currently has no flights to Asia, though they are a part of the Star Alliance, which is the biggest alliance with 27 members, including United. While Star Alliance is bigger than SkyTeam and Oneworld, it’s not nearly as tight-knit – both of the smaller alliances are building integrated joint ventures to drive business.

The Best of Both
So if this merger does happen, the two airlines would eventually merge their mileage programs. I’d hope (I know, dare to dream!) they’d take the best aspects of each program, which in my opinion are:
American: One-way awards, off-peak awards, low fees, lots of non-alliance partners like El Al, Etihad and Alaska.
US AirwaysFlexible routing on awards including stopovers and open jaws, lucrative buy miles opportunities and promotions like Grand Slam.

So to sum it all up, I wouldn’t be surprised if American and US Airways merged and decided to stay in Oneworld. What do you think?

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