My Thoughts on an American and US Airways Merger

by on March 13, 2012 · 16 comments

in American, US Airways

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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?

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Jamison

    i hope AA doesnt merge with US……… just doesnt make sense

  • One World Alliance

    Another upside is AA regaining a foothood in the DCA-LGA/JFK-BOS shuttle service in removing the need to market B6 fares

  • Curtis

    As long as lifetime Elite’s don’t lose status and miles aren’t devalued with a Merger, I don’t think it would matter too much. Best of both worlds list as you mentioned would be great though!

  • ArizonaGuy
  • Brad

    My take is that American has very little to gain here in terms of business model. The combined route and hub networks just don’t offer much upside for AA. That said, US Airways’ pushing the deal could potentially help fund AA’s emergence from chapter 11, but it would be shortsighted to ok a merger based largely on that without much to recommend it taking a long view.

  • Dave Op

    I hope they don’t merge. There isn’t enough competition in the U.S. airline industry. US Airways has the worst award availability (worse than Delta) in my view. Every time I try to use it, only the medium and high awards (mostly high) are available. Say “No” to merger.

  • Johnny Bench

    If they do happen to merge, just make sure you give us a heads up in time to collect all the card bonuses one last time for the airline that’s going to get eaten up!!

  • Bryce

    Once had a dream about a real nice domestic airline named “American Airways.”
    Maybe my dream will turn out to be prophetic.

  • jumpdogjump

    did you see the name list being reserved? not one of those would be used. But if a merger did take place, my choice of names would have to be AmUSican.

  • G Force

    Fine with me, as long as my Lifetime Platinum AAdvantage status and Lifetime Admirals Club memberships are preserved.
    As long as airfares don’t go through the roof.
    Keep the American Airlines name.

  • Henry82

    TPG, In light of the recent UA/CO merger, which program would you say is better for earn-and-burn? US Airway’s Star Alliance award chart is more generous than United’s, but now that UA is a transfer partner with Chase UR… would very much appreciate your insight on this.

  • thepointsguy

    I like UA better… better website, better transfer partners, lower fees and one-way awards

  • freqflyercoll

    Add to the list of things to keep about programs, the absence of restrictions on AA SWUs! :)

  • Henry82

    What about the huge difference in premium award redemption levels? ex. U.S. to Asia r/t, UA costs 120k C/140k F while US costs 90k C / 120k F.

  • Dakellum

    Perhaps I’m way off base but I think I smell Delta. U.S. Airways is such a suboptimal choice the competitive advantage in merging with American is overstated. Delta would certainly have to make major concessions in New York (which could be done without sacrificing their competitive standing) in order to gain DOJ and DOT approval, which I think they can pull off. Their biggest challenge appears to be the European regulators. Regardless, Delta helps American much more than U.S. airways does, and if they think approval would be granted, this is the direction they should go.

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