American -US Merger

 

While, I know its pretty much inevitable, I am not a fan of this $11 billion merger. We know that:

  • Merger will be completed by October, 2013
  • American will be the world’s biggest airline
  • It will have two per cent more air traffic than United Airlines
  • AA will have 6,700 flights to 336 locations in 56 countries
  • The airline will have 1000 planes
  • The new workforce will be close to 100,000
  • AMR creditors will own 72% of the combined airline and US Airways the other 28% of the ownership
  • The American Airlines name will survive
  • Headquarters will be in Dallas/Ft. Worth (US air is currently Phoenix, Arizona based)
  • The airline will be part of One World
  • Doug Parker of US Airways (and America West before that) will be the new CEO of the combined company
  • Current CEO Tom Horton will be on the board as a non-executive until 2014
  • Initially there will be nine hubs: Charlotte, Chicago O’Hare, Dallas/Ft. Worth, Los Angeles, Miami, New York JFK, Philadelphia, Phoenix and Washington

I would rather not see this further shrinkage of the US airline industry. This deal means that four mega carriers will control about 85 per cent of the US domestic airline traffic. My preference would be for International Airlines Group (British Airways/Iberia) to merge with American. Yes, it breaches current US airline ownership laws which still limit foreign ownership of US air carriers. It would diminish some trans Atlantic services but would create a very large global airline and maintain some competition in the US market. A market, which has already seen Northwest and Continental vanish.

 

Some questions from me:

  • How long before the Phoenix hub goes. It is effectively sandwiched between the DFW and LAX hubs. It would make sense for traffic to be routed away from PHX in favour of those two AA cities.
  • How long before Philadelphia is whittled down in favour of Miami and JFK. US has abandoned Pittsburgh and American exited St Louis
  • Will the Reservations system be American’s Sabre or US Airways Shares ?
  • Will American keep its brand new livery which will be on 73 planes by the end of 2013?
  • Can CEO Parker repair the low American Airlines staff morale?
  • Will AA service improve (I put American in the bottom ten airlines I have flown on)

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