American Airlines, US Airways One Step Closer to Possible Merger

American Airlines and US Airways have taken their potential merger talks up a step.

American Airlines, US Airways to Merge?

The two companies said on Friday they signed legal documents to allow them to exchange confidential information with each other.

Listen as airfare expert Rick Seaney tells you what you really want to know:

It doesn’t, however, mean the merger is a sure thing. “It does not mean we are merging – it simply means we have agreed to work together to discuss and analyze a potential merger,” US Airways CEO Doug Parker told employees in a letter.

American Airlines Bankruptcy: From the Start

American, with its parent company AMR Corp., entered Chapter 11 bankruptcy protection in November 2011. American has said they’ve been interested in merging with several airlines, one including US Airways.

FareCompare CEO and co-founder Rick Seaney says that while a merger takes years to execute, in this case, it would make for a strong company.

“The prospective American Airlines/US Airways tie up has turned into a convoluted multi-party game of one-upmanship where the internal airline players agendas are forged by years of animosity and control wavering the balance,” he said. “It is pretty clear that a properly executed merger – a historical coin flip at best – would probably create a stronger business entity.”

The downside? Fewer choices for routes and higher prices.

“Unfortunately for passengers, they would likely see an acceleration of the current trend in reduced choice, packed planes and higher ticket prices, albeit on newer aircraft,” Seaney said.

United and Continental to Merge – Will We Care in 20 Years?

Don’t worry about any major changes happening any time soon. The United/Continental merger was announced in 2010, but finally combined in early 2012.

“For those wondering if a near-term ticket purchase is wise or contemplating early miles redemption, rest easy – bankruptcies and mergers are the new norm, both your tickets and loyalty miles are safe,” Seaney said.

In the midst of these reports. What would a merged American – if indeed it happens – mean for its passengers?

Five Ways Mergers Will Impact Fliers

1.      Higher fares - Mergers mean less competition, and less competition means higher airline ticket prices.

2.      Frequent flier perks - Merging airlines are careful not to mess with their rewards programs, because they don’t want to irritate their loyal customers and fliers.

3.      Route Changes- Smaller cities typically feel the most pain from mergers, since they can lose flights or get dropped altogether. In other cases, merged airlines might offer passengers an increase in destination opportunities.

4.      Crowded plans – Expect plans to be packed because they of fewer seats and less planes.

5.      Crowded plans - Airlines will pack plans more because they have fewer seats and now less planes.

 

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Published: August 31, 2012