American Airlines and US Airways to merge.

[Aerlingus1916]

American Airlines To Merge With US Airways

Last Updated 08:55 14/02/2013
American Airlines and US Airways are preparing to confirm a merger to create the world's biggest airline.

It is understood the deal would help secure loss-making American's future, 15 months after it entered bankruptcy protection.

The new carrier would reportedly keep the American Airlines name but would be run by US Airways chief executive Doug Parker.

American's CEO, Tom Horton, would serve as chairman.

Sources said the deal had been under discussion since August last year when creditors pushed for merger talks so they could decide which earned them a better return: a merger or Mr Horton's plan for an independent airline.

American has been restructuring under the bankruptcy protection and the agreement would apparently mean that its creditors and possibly its shareholders will own 72% of the stock, with US Airways Group securing the rest.

If the deal is approved by American's bankruptcy judge and competition regulators, the new American will have more than 900 planes, 3,200 daily flights and about 95,000 employees, not counting regional affiliates.

It would also mean that American, United, Delta and Southwest would control about three-quarters of US airline traffic - a situation that worries passenger groups and may concern competition regulators.

Charles Leocha of the Consumer Travel Alliance said that with just four big airlines instead of five, it would be easier to raise fares.

"The benefits of this deal will go only to the corporations, not to consumers," he said.

Just five years ago, American was the world's biggest airline but years of heavy losses - totalling almost $15bn (£9.6bn) since 2001 - drove it into bankruptcy protection.

The company blamed bloated labour costs but its unions accused executives of mismanagement.


What are your thoughts on this newsbreaking matter?

[LemonButt]

I say big deal.  They only had 12 overlapping non-stop routes, so it's not like they have a monopoly on anything.  Delta controlled 88% of flights out of CVG at one point and consistently had the highest fares in the nation.  As a result, people started driving an hour to DAY, LEX, or SDF to fly and save money.  Today, passenger traffic is down from 21 million to 7 million, Comair no longer exists, and they have shut down entire terminals/concourses as a result.  Even P&G executives in Cincinnati are using Lunken Airport and flying charter instead of Delta because of the pricing.  People will find alternatives.

My home airport is AVL.  It is very expensive to fly out of most of the time because we are such a big tourist destination (Obama is here right now as I type this).  I can drive 2 hours to CLT or 3 hours to ATL and get a direct flight almost anywhere in the country if I'm willing to pay for it.  If I want a cheap flight, I can drive to CLT and instead of flying direct, connect in ATL and on to my destination for a much lower fare due to the competition.

With the exception of Southwest, the big boys are all hub/spoke systems that almost always require a connection to reach your destination.  The point-to-point carriers with focus cities are using what Clayton Christensen calls "Disruptive Innovation" to shake up the whole industry.  Southwest doesn't fly to AVL, but they do fly to GSP which is an hour down the road.  They are making the connection a thing of the past as something like 80% of Southwest pax don't connect anywhere--people are willing to drive to a focus city for a direct flight.  If I want to go to BWI for example, I can fly out of AVL and connect in CLT or ATL or DTW on one of the big boys, or I can just drive an hour to GSP and get a direct flight without the hassle of connecting.  Allegiant (low cost point-to-point) can fly me direct to several places in Florida without a connection out of GSP and they are expanding at AVL as well.  TYS is also only 90 minutes away and I got a direct flight on an Allegiant 757 to LAS for only $80 each way early last year.  I drove to ATL and flew Southwest non-stop to LAS back in October for $125 each way.  jetBlue also flies to CLT and I can fly to JFK or BOS for less than $150 each way most days.

So the bottom line is even though I live in a small town with a small airport, there is tons of competition within a 3 hour drive allowing me to get a low cost flight virtually anywhere I want to go.  I've found that the further away you travel, the cheaper things are as you have more competition and options for connections etc.  I fly out of AVL in two weeks flying to JRO (Kilimanjaro) and have 3 connections in CLT, IAD, and ADD (Addis Ababa, Ethiopia).  The flight was $800 round trip + $600 in taxes, which is super cheap (US Airways and Ethiopian Airlines).  The reason it was cheap was because of the connections--I had options to fly through LHR, AMS, CDG, and a whole slew of other (more expensive) options to get there, which pushes prices down.  So in the end, people can complain all they want about the merger, but it's not going to increase prices or create some sort of monopoly on a route that didn't already exist before the merger.