Last week’s news that US Airways was taking a bold step toward a takeover of American Airlines by getting backing from employee unions left some scratching their heads. For one thing, it’s way too early to say whether or not that union support will hold up, or if any merger will ever take place. You better believe American Airlines – currently in bankruptcy proceedings – will put up a fight.
But mergers are a recognized survival strategy for today’s airlines, so let’s take a look at what this could mean for airline passengers as well as the companies and employees that take us where we want to go.
Leaner, Meaner Airlines: Pain for the Airlines
Earlier this year, American announced it was cutting more than 13,000 union jobs including 2,700 pilots and flight attendants. Then a second wave of cuts was announced to eliminate another 1,200 non-union jobs, plus the closures of airport lounges and a call center.
However, the whole point of such painful exercises – whether it’s the result of bankruptcy, mergers or any combination of such changes – is for an airline to emerge leaner and meaner, and better able to compete not just with fellow legacy carriers but with lower-cost airlines as well.
Leaner Meaner Airlines: Pain for Passengers
For those who live in cities served by larger hub airports, pain will be minimized by competition which helps keep airfare prices down. However, oil prices remain high, and fuel prices drive up airfare in the short term.
Smaller cities have it tougher. For example, American Airlines has already reduced flights and pulled cities from its route system that were deemed not profitable enough. If an airline can’t fill those empty middle seats, it may not be making enough to fly an entire plane-load. And if an airline withdraws a route, that airport city is left with less competition which again, generally means higher airfare prices.
Leaner Meaner Airlines: Better than No Airline at All
Doing more with less is a survival strategy of the 21st century, and a lesson airlines have taken to heart. It can be a painful process all the way around but at least it usually means an airline will be around – for a few more years, anyway. The alternative is seeing a once-proud name become grist for a nostalgic TV show – and Exhibit A on that score is Pan Am.