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DOJ Settles With American – Merger Moves One Step Closer to Approval

by on November 12, 2013 · 36 comments

in American, US Airways

While American Airlines and US Airways announced their plans to merge in February, the Department of Justice and Attorney Generals of several states attempted to block the merger in a surprise suit filed in August claiming the merger would not be good for consumers. In a release issued today, it appears that American has settled with the DOJ and Attorneys General in a way that has quelled their antitrust concerns. This allows the merger to go to bankruptcy court for final approval as soon as this December.
aa-us-airways-merger-tails-021413-300x168Key details from American’s press release:

·         Under the terms of the settlement, the airlines will divest 52 slot pairs at Washington Reagan National Airport (DCA) and 17 slot pairs at New York LaGuardia Airport (LGA), as well as certain gates and related facilities to support service at those airports. Each slot pair entitles the holder to one departure and arrival.

·         The airlines also will divest two gates and related support facilities at each of Boston Logan International Airport, Chicago O’Hare International Airport, Dallas Love Field, Los Angeles International Airport, and Miami International Airport.

·         After completion of the required divestitures, the combined company expects to operate 44 fewer daily departures at DCA and 12 fewer daily departures at LGA than the approximately 290 daily DCA departures and 175 daily LGA departures that American and US Airways operate today.  Each is a departure and arrival.

·         The divestitures required by the settlement are not expected to impact total employment at the New American.

·         In the settlement agreement with the state Attorneys General, the new American has agreed to maintain its hubs in Charlotte, New York (Kennedy), Los Angeles, Miami, Chicago (O’Hare), Philadelphia, and Phoenix consistent with historical operations for a period of three years.  In addition, with limited exceptions, for a period of five years, the new American will continue to provide daily scheduled service from one or more of its hubs to each plaintiff state airport that has scheduled daily service from either American or US Airways.  A previous settlement agreement with the state of Texas will be amended to make it consistent with today’s settlement.

In agreements with various state Attorney Generals, they’ve agreed to continue service to a number of smaller airports such as Yuma, AZ and Wilkes Barre/Scranton, PA.

All in all, this merger looks like it will be approved since bankruptcy judges have already signaled their willingness to approve since the boards of both American and US Airways have approved the deal and the merger is expected to produce over a billion dollars in annual synergies beginning in 2015.

My Thoughts:
I selfishly didn’t want the merger to go through because I like American and the path they are on. US Airways senior management, including CEO Doug Parker will head the new airline and I personally think the service culture and overall quality of US Airways is significantly inferior to American. Additionally, I like being able to leverage both frequent flyer programs for their sweet spots (like American’s off-peak awards and US Airways super generous business class awards to North Asia (90,000 miles roundtrip) and South Africa/Australia/ South Pacific (110,000 miles). Once the merger is finalized, the US Airways Dividend Miles program will begin to merge into American AAdvantage and their award charts will likely be “synergized” (read: devalued).

Also Read: The Top 10 Reasons Why I Don’t Want an American/US Airways Merger

Additionally Barclaycard will likely lose the US Airways credit card contract, so there will be less credit cards to leverage. American’s Citi products are decent, but the US Airways Mastercard is one of the most lucrative credit cards with award discounts and elite status earning potential.

From a loyalty/mileage earning perspective I see less options and with the relatively insignificant slot forfeitures, I see less competition in the future and thus can’t help to think airfares will increase as well.

However, American has been mired with financial troubles for years and many in the industry think that this merger is the best possible option. I personally think they are already on track to emerge as a profitable stand-alone carrier, posting record revenues these past couple months and will likely continue to do the same as the economy improves.

I still need to let this sink in, but I can’t help be a little disappointed at the news – at least from a consumer/frequent flyer perspective.

What are your thoughts?

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author.s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through the credit card issuer Affiliate Program.

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  • LowlySpartan

    What are your thoughts on how this affects the BA Card, which now has the 100k point deal? Being in DC, American’s limited number of flights was keeping me from the card, but now that they’ll fly wherever US Airways flys, I might have to take another look at it.

  • thepointsguy

    It’ll definitely increase the number of flights/award possibilities for those with Avios. I actually see this as a win for those with Avios/other Oneworld currencies because there are more options to redeem.

  • http://www.conversocial.com/ Anthony Thomas

    The likely devaluation of the rewards is a shame, as there were some decent US – Asia gems I was hoping on using in over the next few years.

    However, I’m happily awaiting the US Airways card to arrive which I’ll sit on and hopefully merge with AAdvantage to make up for it in the short-term.

  • Daniel

    What if the only card you have is the Barclay US Airways card? Do you think it will help people like myself who limit themselves to just using it? When I first read about it I was glad I could possible start using it for AA miles as well?

  • pcg

    The idea, generally, is that there will be a period during which the two FF programs will be “linked” and points will be transferable between the two. However, that’s usually stated in the context of moving Dividend Miles to AAdvantage miles.

    I actually want to do the OPPOSITE and move some of my AAdvantage miles to DM in order to redeem business class from Mexico to S Asia (w/ stopover in Europe) for 90K per person. (I have a family of five and it feels like the time is running out on this redemption.)

    IOW, I will want to transfer AA->DM and make a US Airways redemption. I know you don’t have a crystal ball, but given the way mergers have gone in the past, do you expect there will be a period in which to do this?

  • Fat Ted

    This has to be bad for the consumer. There’s no way fares won’t rise, as the number of competitors is reduced. There’s no way frequent fliers come out of this as a winner either, as the number of award options will be reduced.

    Here in PHL, I’ll enjoy the next (and likely final) 3 years of still being a hub and wonder what the future will bring. I wonder how they’ll force the hubs to operate the same for three years.

  • Goat Rodeo

    I’m sort of happy my US Airways points will be merged with my AA status… it gives me better opportunities to use my miles as I tend to try to consolidate to one airline and hotel provider.

  • peter

    bad for the consumer. from all aspects

  • Michael Rasmussen

    Any ideas on which alliance they’ll stay with?

  • Brian L.

    From the time that US announced their takeover bid, it has been stated that they’d stay in oneworld.

  • Michael Rasmussen

    Thank you

  • NLD

    Any word on being able to transfer my Chairman’s status to Executive Platinum on AA?

  • disqust101

    Time to get all the US Air cards while you still can. Card pimps are salivating…

  • PHLflr

    I’m on the verge of USAirways platinum and will either have to make a mileage run or buy up to get there. Is that worthwhile for 2014 since AA doesnt have an equivalent tier?

  • Diotallevi

    I have a crap-ton of US Airways miles and I use nearly all of my miles to fly business class on ANA from NYC to NRT. Looks like I’ll be switching to JAL now. What is business class award availability like from JFK to NRT or HND on JAL using AA miles? anyone? Of course I could always fly American, but I like the Japanese airlines better.

  • hdtvinformation

    This increases my route options on AA and hoping the path American wins out even if some of the upper management is US Air…. well see.

  • hb

    Question; I am US Airways Chairmans preferred and about to book flight on Singapore airlines flying in January 2014. Will we still get US Airways dividend miles at that time?

  • hb

    or should I start booking on Oneworld alliance to get miles?

  • schistosomiasis

    This is very bad for a number of (selfish) reasons- first, as a silver on US I get upgraded not infrequently and always get aisle exit row (live in PHX). American will probably use 500 mile certs, will see if I can still get exit rows… Secondly service from PHX will probably suffer with flights shifted to lax and Dallas. Thirdly, less credit card churning if Barclays goes away, they have been good to me :) I will miss the Barclays 25k spend for 10k preferred miles. Finally, reward inventory on US metal is very poor while it isn’t bad on AA metal (although recently I have noticed it becoming worse), wouldn’t be surprised to see the new AA have lousy inventory, also less options to book Star Alliance awards, TPG was right 90k to Asia in biz is sweet.

  • joeypore

    Management is the biggest problem IMO. The new American’s route network will be great…….but at what cost? I would rather have better service than an extended route network. That’s what alliances are for…

    Less competition = more expensive tickets.

    This all around makes me nervous… United went a terrible direction since it became the behemoth that it is…

    I just hope they prioritize good customer service moving forward. If they want to do this right, that has to be the key.

  • az

    hi,
    as a guy who has only ever used star -i am trying to work out whether best to burn us air miles quickly or take them into the new AA.
    As i have no idea about aa mile use-is it poss to run a feature /guide on advantages disadvantages of this?
    thanks

  • RobertBarron

    Good for me to keep in mind….I have 200K Avios, and will probably spend enough in 2014 (Thanks to Mr. Bluebird and those Baby Ducky Visa Gift Cards- got to love them!) to get the Travel Together ticket. Plus, I love it whenever BA and AMEX do the transfer bonus, b/c I usually rack up 30K Amex per year….wish the current transfer bonus was more generous.

  • Steven S

    With lots of US Air miles and a wonderful timeshare in PHX (the Westin Kierland), the US and US non-stops from EWR to PHX in Business Class were an annual spend. Sad to imagine it going. May be time to dump the timeshare and buy a second home in Florida!

  • thepointsguy

    I just hope they prioritize good customer service moving forward.” I’m nervous about that with US Airways management at the helm!

  • thepointsguy

    I don’t imagine they will get rid of the 75k tier, but we will have to wait and see. I wouldn’t worry though

  • thepointsguy

    The best US Airways offer of 35k after first purchase isn’t an affiliate link, but I still promote it because it is the best offer on the market. Agree now is the time before it is too late!

  • thepointsguy

    oneworld

  • http://continentaldrift.co/ Eli Stoughton

    I believe that TPG predicted earlier that the US Airways Barclay cards will eventually go away (they will replace all of our cards with Arrival cards or something), and that AA will be sticking with Citi for the cards on the New American. This means that right now may be the last time to take advantage of the sign-up bonuses for US Airways, that the $25k in spend for 10,000 elite qualifying miles will go away (and the only option would be 40k in spend on the AA Citi Executive for 10,000 elite qualifying miles). In the end, there will probably be less benefits from the credit cards after the merger. However, if you take advantage of the signup bonuses on personal and business US Airways cards while you still can, you could end up with a much higher mile balance when the programs are merged.

  • Nate

    How soon after the merger is official and approved do you guys think they will allow us to move US Dividend Miles to AAdvantage?

  • tassojunior

    R.I.P. American Airlines

  • Brian L.

    In Dougie’s worldview, customers are supposed to serve him.

  • Brian L.

    AA said in bankruptcy court a while ago that they’d stick with Citi.

  • Susakajo

    I agree. I like AA’s culture significantly better. I have rarely had good experiences on US Airways, and quite a few negatives (of course, I have no elite status with them and that makes all the difference). I am sure that the award system will be devalued. We have 4 millions miles stored up – wonder if we should start using them when we can. The problem is that we keep purchasing flights to maintain Exec Plat status so the miles continue to pile up. How long do you think it will take to be official. / Also are they maintaining the hub at DFW – e.g., the new flights announced from DFW to Asia won’t go away, will they?

  • joeypore

    DFW will remain the headquarters for a very long time. AA has a lot of money / resources tied up in DFW. Not to mention, it’s very efficient positioning for an American based network. It’s a reasonable distance between just about every North American city.

    As far as your mile collection, if you’re not going to donate them to someone like myself ;) …..hahaha, I kid.

    I’d say use them on a nice Business or First class RTW ticket!! Maybe find some award space on Qantas’ DFW / SYD flight? It can be done if far enough out in advance.

    And as far as the new DFW / Asia routes, no, they won’t go away. :) The Hong Kong & Shanghai additions should give them a good bit of premium flyer money.

    Seeing more and more 14+ hour flights take off from DFW is exciting though :)

  • Susakajo

    Thanks for your reply. We live in SEA but often have to backtrack to DFW or ORD when going west. We have been unsuccessfully trying to get biz or 1st cl mileage seats on Qantas flights to Sydney for 3 years now. Tonight we used a pile of miles for tickets for family & wedding attendants to get to my daughter’s wedding she is planning in Scotland this summer (many in 1st and biz) and still have 3 million left. / I do wish this merger wasn’t happening.

  • Curtis

    My thought… why are all the bloggers leaving DFW off of the AA hub list? There is not a chance that DFW disappears from AA merger or not…

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