Should American merge with US Airways?

A deal would create the country's largest carrier and could jack up ticket prices.

By TheWeek.com Jul 12, 2012 11:51AM

Image: Airline (© Christie & Cole/Corbis)This week, American Airlines said that it would formally begin reaching out to potential merger partners, reportedly including competitor U.S. Airways (LCC), which has been relentlessly pursuing a merger for months.


The announcement from parent company AMR Corp. (AAMRQ) marks an about-face for CEO Tom Horton, who has long insisted that the company first emerge from bankruptcy proceedings, which it began in November, before considering a merger. However, Horton has been under pressure from AMR unions and creditors to team up with U.S. Airways, which would create the country's largest airline and a formidable competitor for United (UAL), which recently merged with Continental, and Delta (DAL), which combined with Northwest.


Should AMR merge with U.S. Airways?

Yes. A merger is American's only option. "Virtually everyone in the industry believes that American, the third-largest airline in the country, and U.S. Airways, the fourth-largest, will eventually have to merge to stand a chance" against United and Delta, says Andrew Ross Sorkin at The New York Times. The airline industry has moved toward consolidation in recent years, in order to keep costs down and maximize profits, and American won't be able to withstand the trend for long. "The question is when, not if." 

No. American can stand on its own. Investors scoff at the idea that American can remain independent, but in recent months the struggling company has shown "encouraging signs," says David Koenig at The Associated Press. American is posting "better revenue per mile flown by each seat than its rivals," meaning it's "able to raise fares while filling seats." The airline says it has boosted business in the "all-important corporate-travel" area, and its bankruptcy proceedings should help it reduce its labor costs, which are the highest in the industry. Put all that together, and it's possible that Horton can keep American from U.S. Airway's clutches. 

And it would be bad for travelers. The most likely outcome of an American-U.S. Airways merger is higher fares for travelers, says ABC News Radio. The recent trend of combining independent airlines into behemoths has led to a spike in ticket costs and fees, since airlines have less competition than before, which gives them little incentive to offer cheaper prices. What the country needs is fewer airline mergers, not more.

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2Comments
Jul 12, 2012 10:37PM
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It is pretty disgusting how the airlines jampack us together, and now jack up all fees and costs.  Here's one way to get back: Drive whenever you can or take AMTRACK--it's a lot more comfortable and you can find a bathroom, decent eats and stretch your legs anytime you want.  For trips over 500 miles we're screwed.
Jul 13, 2012 2:36AM
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When I fly to Dallas I fly into Love Field, and when I fly to Chicago I prefer to use Midway too.  When I fly to LA I would much rather use Burbank, and when I head to NYC I prefer LaGuardia too.  I fly a fair amount into Las Vegas, and when I go to Houston I prefer flying into Hobby.  And the only airline that does all of these routes out if DIA is Southwest, one of two airlines (the other being Frontier) that I am a frequent flier with.

Now if Southwest could learn to upsell the first few rows with a little more legroom like Frontier, Jet Blue, and United do, I would be even happier with them than I am now!

You want an airline that offers top-notch service in coach on international flights, might I recommend Air Canada out of Toronto, where US-originating and US-bound passengers enjoy a Canadian and US Customs advantage at Pearson Airport that Canadian residents do not, which makes clearing customs at Pearson onto connecting flights really quick and easy for US passengers too.

I've flown American a couple of times recently, but their seats are way too tight, especially the A and B seats on their MD-80s, and both their Dallas and O'Hare operations badly need some updating too.  Their LAX operation is OK in my book, if you can stand to fly into or out of LAX, which is almost as much fun as O'Hare or JFK in rush hour too.  The last time that I flew on American the flight was on an old MD-80, and just sitting down my seat, 33-D, broke and the back fell right off.  It was the last row of American's notorious "roach" class, and my seat was the only one in that row that didn't have a bulkhead behind it.  Fortunately the A and B seats in the same row were open, which I got to sit-in very uncomfortably sideways all the way from ORD to DIA, as my legs would have had to be 4 inches shorter just to get my knees in behind the seat ahead.

Whatever happened to those old 727s that had a couple of inches more legroom than I need at 6'4"?  Yes perhaps American should merge with US Air/America West, so that the three airlines together might be able to compete well with Southwest, Air Tran, and Frontier if they would be willing to buy new planes with more legroom, lower their fares in order to compete, and offer a greater level of personal service than American offers now!    



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