US Airways to Potentially Takeover American Airlines- What it Means for Your Miles

Apr 20, 2012

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Per this CBS News report, US Airways filed preliminary Securities and Exchange Commission filings to begin a takeover of American Airlines. This does not mean a takeover/merger has been agreed upon, but simply that US Airways has discussed the possibility with the key labor unions involved and they’ve come up with an agreed upon plan if this all comes to fruition. Of course, we have no idea what is currently (or has been) discussed between US Airways and American and while American has stated it would like to come out of bankruptcy as a stand-alone carrier, they’ve got a lot to do – especially since they just posted a staggering 1.7 billion dollar loss in the first quarter of 2012.

Assuming that a US Airways and American merger/takeover/whatever-you-want-to-call-it happens (which I honestly feel like it will), what does that mean for your frequent flyer miles?

Generally there will be a grace period before any major changes occur, so I wouldn’t panic. That being said, airline miles generally devalue over time, so I encourage using your miles vs. stockpiling them.

The biggest questions I have, with respect to the combined frequent flyer program:
1) Which alliance will the combined airline choose?
US Airways is a part of the behemoth Star Alliance, with North American competitors United and Air Canada also members.
American is a part of the smaller, but tighter knit Oneworld alliance. If Oneworld loses American, they will not have any North American carriers, which would be a huge blow to the network.
My thoughts: I bet the combined airline will be a Oneworld carrier. US Airways has been the neglected stepchild of Star Alliance for a long time and I think they’d stand to gain more from a tight transatlantic partnership with British Airways and Iberia.

2) Which credit card company will the company go with?
US Airways is currently partners with Barclay’s and they offer a range of decent credit cards, though none that have really taken off in popularity (pardon the pun).
American has a strong partnership with Citi and they’ve developed a very broad portfolio of credit card products.
My thoughts: The combined airline would maintain the AAdvantage branding and remain with Citi.

3) So, which frequent flyer program will the new program keep?
I bet they will take aspects of both, but to be honest American AAdvantage is a well oiled machine and it would be a shame to see it dismantled. AAdvantage was the first frequent flyer program ever, so not only does it have a huge number of members, but it has a rich history as well. Dividend Miles on the other hand has had a rockier past, with several dark periods of mismanagement that disgruntled a large number of members, the effects of which can be still felt today.

There are thousands of more questions to be asked, but I’m going to wait until more news develops before really digging into the details. However, my overall thoughts are that airline mergers are generally not consumer friendly because prices will rise with less competition, however that doesn’t mean they aren’t necessary – especially when some airlines are losing billions of dollars. Both US And American have strong frequent flyer programs and if the takeover does happen, I hope US Airways maintains more AAdvantage than Dividend Miles. Time will tell!

What are your thoughts on a potential takeover?
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