What You Need to Know about an American Airlines-US Airways Merger

UPDATE: The merger is on. The creation of a new mega-carrier, the world’s largest, was announced on Feb. 14. They are keeping the name American Airlines; the airline will be part of the Oneworld alliance; and US Airways’ Doug Parker will be run the show.

Earlier:

I expect that a merger between American Airlines and US Airways is likely to be announced shortly. As we’ve noted here at FareCompare, the buzz is getting positively deafening. Anyone who flies has questions.

Q: Will my tickets still be good?

A: Absolutely.

I explain that further, below. See what else you need to know.

Listen as air travel expert Rick Seaney offer fresh insights on what to expect:

American in Bankruptcy – Timeline

What to Know about Possible American-US Airways Merger

  • New Airline’s Name

I would be shocked if they don’t keep the proud old name “American Airlines” which has been around since 1934.  Even US Airways CEO Doug Parker said the iconic name should be retained – as well as AA’s Ft. Worth headquarters – and he should know since he’s widely seen as the man who would wind up running the show.

  • New Leadership

If you’re not familiar with Parker, I give him credit for turning US Airways into a scrappy and profitable airline, no easy task in the post-9/11 environment. He also has the backing of American’s unhappy pilots union while current American chief Tom Horton does not. As air travel analyst Dennis Schaal notes, “Neither Horton nor Parker is going to pick up an AFL-CIO man of the year award anytime soon” but Parker is seen as tolerable while AA’s unions seem to have jumped on an anyone-but-Horton bandwagon. Watch for some culture clash between the old-line legacy carrier American and US Airways with its low-cost carrier roots (it merged with America West in 2005).

  • Airline Tickets and Miles – Still Good

If you’re holding airline tickets on either carrier – and a merger goes through – relax. Your tickets will still be good. It takes well over a year to finalize such complicated unions (and sometimes even two or more) and in the meantime, the two airlines will continue to operate as separate entities. Absolutely your tickets will be good.

Save on most flights with one simple schedule change

Same for loyalty or rewards miles. In fact, a merger will probably make them worth more, if the recent United/Continental and Delta/Northwest unions are any indication; for one thing, it extends route options for redemption.  Sure, there may be some short-term heartburn (think of the infamous computer glitches when United and Continental integrated their websites) but airlines are extremely sensitive to their highest-paying customers – the business travelers – and there is little upside to tampering with a road warrior’s beloved miles and perks.

  • Airfare Prices – Going Up

Most air travel pundits rightly note the minimal overlap between the American and US Airway route systems but they also point to this as a reason why no one should get too concerned about higher ticket prices. I disagree. A merger guarantees the two airlines will never compete in the future and competition is the main driver of cheaper airline ticket prices (along with oil, seat supply and consumer demand). The only good news is, if airlines get too frisky with higher prices, consumers let them know by cutting back on air travel, and when that happens – ticket prices drop. In this era of less competition (and if this merger goes through, eight airlines will have morphed into four in the past three years alone), this is a passenger’s last line of defense.

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  • Routes, City Changes

In the wake of other mergers, we’ve seen airlines “defocus” cities like Cincinnati and Cleveland so there is likely to be some reorganization if AA and US Airways tie the knot, mostly on the latter’s side as American’s domestic hubs – Chicago, Dallas, Los Angeles, Miami and New York – are considered top tier in the industry.

Mergers are about synergy, and synergy has become a code word for doing more with less, so it would buck a trend if there were not some cuts. However, given the belt tightening of airlines over the past few years it likely won’t be drastic – both AA and US Airways have been retracting into their hubs at the expense of smaller cities for some time now.

  • A Merged American-US Airways – New Number One

After ceding the crown to Delta (after its merger with Northwest) and then being pushed further down the airline chain with United’s merger with Continental, a new American-US Airways super airline will again rise to the top as the biggest carrier by revenue.

  • Bottom Line

There’s a lot to support if this marriage comes off but the big positive is this: a combined American-US Airways will be stronger, more profitable and more financially secure. That’s a big deal for flyers because in the long run, economic stability means product improvements can be made after decades of neglect. Which would you rather fly – a creaky old plane showing the grime and wear-and-tear of the ages – or a state-of-the-art aircraft with all the bells and whistles and a brand new paint job?

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Published: February 7, 2013