American and US Airways Board Approve Merger and The Potential Winners and Losers

by on February 13, 2013 · 32 comments

in American, US Airways

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Several reputable news outlets, like the AP and ABC News, just reported that both American and US Airways boards approved a deal to merge the airlines. Details will be announced early tomorrow morning, but basically US Airways CEO Doug Parker will be the CEO and the headquarters will be in Dallas (American’s current headquarters). The deal is reportedly worth almost $11 billion dollars, giving American creditors 72% ownership and US Airways shareholders 28%.
AA US Merger
There are still many details to come, but as an American Executive Platinum and US Airways Dividend Miles aficianado, I’m not thrilled, but it’s useless to “hope” that it won’t happen at this point. The next step will be for the government to approve the deal, which is expected to happen without a fuss since they’ve approved the past three big airline mergers and AA/US only have twelve overlapping routes. The last couple airline mergers have taken about 6 months, but I could see this getting approved in closer to 4 or 5 – so at some point this summer.

Once approved, they still have a huge task ahead of them integrating cultures, procedures, IT systems and frequent flyer programs to name a few. That took Delta and Northwest about 15 months to complete from government approval and I can’t imagine American and US doing it much quicker. Depending on how quickly they can work, I wouldn’t be surprised to see the ability to combine/transfer miles by the end of 2013 and the frequent flyer mile program to merge for the start of new new elite year March 1, 2014. That would be a quick turnaround, but even if the carrier was still operating as two separate airlines, it could be possible to streamline the frequent flyer programs sooner. However, before you go off buying US Airways elite qualifying miles in hopes of them transferring to American next year, I’d wait for more information so you don’t drop a lot of money on potentially useless EQMs.

I think there are people who stand to gain and lose on both sides of the aisle (no pun intended). Here are my overall thoughts:

Potential Winners:

Both airlines: AA and US flyers alike will be able to combine regular, elite and lifetime miles from both programs to achieve awards, elite and lifetime status quicker. This could be huge for US Airways flyers who banked lots of AA credit card miles from the days when they used to count toward lifetime mileage.

American: AA flyers who will now have a greater route network to accrue and redeem miles on what will become the largest airline in the world (by most metrics). I also think that the new carrier will have four elite tiers and implement complimentary upgrades (similar to US Airways current structure), so flyers who fly over 75,000 miles a year will be able  to get higher status. Right now American only has elite levels at 25,000, 50,000 and 100,000 miles.

US Airways: I suspect the new airline will use American’s Sabre-based IT systems and fare products, including the new Choice Fares platform, which I think are a great value for consumers who change their flights and don’t want to pay for full refundable fares. From an online award booking perspective, is much better than which shows almost no partner award availability (and is why so many people think US Airways miles are useless). I suspect the new airline will keep American’s policy of allowing one-way award tickets for half the price vs. US Airways current policy of charging roundtrip prices no matter what. US Airways Chairmen Preferred may also win big on systemwide upgrades if the new carrier continues to award 8 systemwides for achieving 100,000 EQMs in a year (they currently only get 2 upgrade certificates).

Potential Losers:

Both Airlines: Mergers exist to increase profits and cut costs, so undoubtedly there will be reduction in capacity and I suspect certain hubs, like Phoenix, may see reduced service as international hubs like Los Angeles and New York continue to grow. From an elite perspective, with a combined pool of elite passengers and less flights, elite upgrades may become harder to score. With less competition in the marketplace, fares could also potentially rise, though we haven’t seen that effect over the past couple years as airfares have still remained low compared to historic levels.

American: If Doug Parker trims service levels, we could see the overall quality of service decrease. Parker, after all, is the man who introduced paid soft drinks and water on US Airways, until enough customers complained/fled and they repealed that policy in 2009. American has done a great job at revamping catering and overall service levels- I recently had a three course meal on a Chicago to Miami flight in first course- I would have been lucky to get a meager wrap on US Airways on a similar length flight.

US Airways: Dividend Miles members will likely lose the ability to redeem on the 27 Star Alliance carriers since the new airline will be in the oneworld alliance, which has only 12 members (Air Berlin, British Airways, Cathay Pacific, Finnair, Iberia, Japan, LAN, Malaysia, Qantas, Royal Jordanian and S7. Sri Lankan and Qatar are scheduled to join oneworld in the near future. In addition, when the award charts are streamlined, I suspect many of the amazing Dividend Miles awards (like 110,000 miles for roundtrip business class to South Africa and Australia) to increase greatly. For my South Africa trip that I took this January, I’d need 150,000 AA miles vs. the 110,000 US Airways miles that I used- a 36% increase,  plus you’d have to route via Europe, potentially paying huge taxes and fees. US Airways members may also lose the ability to include a stopover and open jaw and route generously- AA only allows a stopover on international awards at the gateway city.

There are many more considerations and potential ups and downsides to this merger, so feel free to comment about your thoughts and conerns. I don’t think we will get much clarity on the nitty gritty details until the government approves the merger, but it’s best to start thinking about how you can maximize this situation to your advantage- whether redeeming US Airways miles now before any potential award increases or signing up for credit cards now since only one issuer will remain once all is said and done. Check out this post for more ways to maximize an AA/US merger.

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    Agreed on all points, especially from a service perspective. American has, in my opinion, come a long way with their offerings, and only has plans to improve. Doug Parker, on the other hand, seems to be content with offering only the minimum service.

    I hope that AA standards are used … because God help us if they aren’t.

  • ATLJason

    Typo in the second paragraph: “I wouldn’t be surprised to see the ability to combine/transfer miles by the end of 2012…” Presumably you mean by the end of 2013 here?

  • miffSC

    As a top tier US elite, I am very sad to see the end of being a Star Alliance member. I will miss the automatic upgrades that we enjoy now – I only missed two upgrades out of 80+K miles flown between July and December of last year. I hope that the new airline will continue to allow buy up to preferred if one misses by number of miles flown. The only way I see that happening though is if they reduce the number of systemwide upgrades that AA now offers. Would be happy to see a compromise on that…. the 500 mile upgrade thing with American is a huge turnoff.
    I am so sad. :(

  • Mgarcia25

    I am a basic miles member of US Air… I was confused by the article (sorry, because status and lingo gets me a lot.) Does this mean the miles I have with US Air wouldn’t be transferred (potentially?) or that it would? Just wondering if it’s worth it to get another US Air miles card in the meantime.

  • Pete

    I am planing on booking F class to Australia next year using DM within a month or so, should I worry about US Airways changing their award rules?

  • Pete

    I am planing on booking F class to Australia next year using DM within a month or so, should I worry about US Airways changing their award rules?

  • Points Surfer

    I feel the pain of the new AA being part of the smaller oneworld, but of course the silver lining here is that in just a few months oneworld will have 3 out of the 6 5-star airlines, which greatly increases the value of redemptions.

    More interestingly, I would not be surprised to see Citi keep the AA relationship and making ThankYou points transferrable to AA miles sometime during the integration process…

  • tassojunior

    Citi will get the US Air CC very very soon after the merger agreement.

    US has never integrated with America West since it was taken over by them. AW pilots and US pilots cannot even be in the same cockpit now. It will be 3 airlines now working under one name for a very long time.

    But Doug Parker will gut AA awards, elite status, customer service very soon. Anything that costs an extra penny will be history.

  • Marcus Worth

    “… I wouldn’t be surprised to see the ability to combine/transfer miles by the end of 2012…”

    Well, I for one, would be very surprised if anyone could make that happen. ;)

  • thepointsguy

    Yes- will fix

  • thepointsguy

    There should be some advance notice, but I’d recommend booking sooner than later

  • thepointsguy

    Doug Parker is capable of making us airways profitable, so I wouldn’t be surprised if time travel was another talent!

  • thepointsguy

    Would LOVE to see ThankYou to AA. That would be a major positive

  • thepointsguy

    Yes all miles will be safe and combined at some point so don’t worry. I’d get the Barclays card, solely because I bet it won’t exist at some point

  • jim

    what about our AA and US airways miles? are they safe? will the US airways miles become AA miles?

  • thepointsguy

    Don’t be sad yet- you never know if the new program will have complimentary upgrades- my guess is that it will

  • Rick

    TPG, I’m trying to achieve million-mile status. I just signed up for the Barclay’s cc and will also sign up for their business version. After the merger, will my US Airways miles be added to the AA million-mile bank?

  • Cohenm123

    Small typo in the Potential Loser – American section: “first course” – I’m assuming this should be “first class”?

    Thanks for the blog post though!

  • thedubtx

    As a former 20-year Continental One Pass devotee living in So Cal, Continental trimmed its daily flights to SNA, SAN and ONT leading up to the United merger, and I was in frequent flyer no-man’s-land for a while. Now living near DFW, I’ve thrown my chips in with AA and made Gold status the first year. Maybe not a power traveler like you, but I’m working on it! On flights where AA rates are price prohibitive I’ll take US Air only because I can earn United miles, but with ZERO expectation of customer satisfaction. My biggest concern with the AA/US Air merger: How many of those worn out US jets and downtrodden flight attendants will we start seeing on DFW routes? The whole US Air package is almost depressing….

  • Carson Schroeder

    Credit card bonus miles don’t count towards million mile status.

  • Jim

    Since One World partner airlines all have a 3tiered elite status system, I don’t see how a new 4th tier can be added for the new AA. it doesn’t make sense and would pose quite an integration mess.

  • Mjkuhnunc

    Tpg – I am currently premier platinum on united but fly us air often. I use my united number for star gold benefits. Through my employer I can get a status match for American. When should I request that status match to get maximum value?

  • Emily

    I’ve held off booking a flight with AA because of this supposed merger. Could it cause chaos for fliers? Im due to fly to Dallas in November from London Heathrow. I’ve got no choice if I want to fly direct (which I do) as only AA and BA (but operated by AA) fly there direct. I’m just worried that if I book now, come November things might chaotic depending on when how long this merger takes.

  • MarcNYC

    TPG- Do you think its a good idea to jump on the USAir chairmans card deal now and get those 50k points since it will be able to transfer to AA in the near future?

  • Samjohnmiller

    BA also has a BA-operated daily direct from LHR to DFW. I live in Dallas and fly AA frequently; I wouldn’t worry at all.

  • Andrew

    I just realized another big benefit of the merger. We would be able to use BA avios for short distance but typically expensive tickets on the US airways east coast routes. These are where avios will be the most valuable. Also, there are many east coast airports that do not have AA or even OW presence so this opens up the redeeming opportunities of AA and BA miles.

  • Andrew

    I am in the same situation as you. I am going to wait until after mid year so the status is effective through 2014. There is not rush now, for me at least. The corporate status match program is great. I went through the AA screens and it doesn’t even look like they ask for proof to be sent in.

  • Afkabp

    Winner – Award Wallet users who should be able to be able to track their AA balances (at least for a short time) by transferring them to US.

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  • Frank Lockwood

    Thanks for the post, Pointsguy. As someone who will soon have enough AA points to fly to Europe, do I need to rush and use the points up before the merger or can I take my time? My fear is not that the frequent flyer miles will vanish; instead, I fear that the post-merger airline will raise the number of miles needed for a free trip or introduce steep surcharges.

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