American to decide on merger Jan. 9, Bloomberg says

American Airlines’ Board of Directors will meet on Jan. 9 to decide whether to merge with US Airways, according to this report by Bloomberg News.

The outcome, of course, has ramifications beyond those employees of both airlines. These include, in no particular order:

  • A shift in the oneworld and Star Alliances. US Airways is part of the Star Alliance, though its route system is hardly a key part. Since US says it will adopt the AA name, look for US to move into the oneworld alliance. An AA-US merger strengthens AA’s East Coast reach, but other than this we’ve not seen a great deal of routes that US brings to AA. On the other hand, AA brings a lot more to US.
  • Airports will see revisions to facilities as both airlines consolidate.
  • Some cities will see reductions in service as duplications are eliminated.
  • If the US management is the one that emerges in charge (as we hope), then this will be a major plus for the future of the new American Airlines. If AA’s management is the survivor, we’re much less sanguine about AA’s future.
  • Airbus and Boeing should both benefit. Before bankruptcy, American placed orders for hundreds of current generation A320s and 737NGs as well as the re-engined models. US has a large order for A320ceos and A330s, but no A320neos. American’s fleet replacement need is so large that it probably needs both single-aisle OEMs. We could see some adjustment in the orders, which never were firmed up, and taking into account the US outstanding orders. But we’d be surprised if the new AA were to cancel entirely American’s Airbus or Boeing orders.
  • Nor do we see US canceling its A350 orders in favor of AA’s outstanding 777 order. US is one of the remaining A350-800 customers and this might be upgraded to the A350-900. But we think there was a fair chance of this happening anyway.

5 Comments on “American to decide on merger Jan. 9, Bloomberg says

  1. Dispite the labor problems at AA, I still think a merger with US is the wrong move. After all these years, US still has not settled the pilot’s lists from their merger with HP, and even if they do US pilots and other employees are paid less than the current AA pilots and employees are. Doesn’t US still have some sort of injunction against their pilot’s union?

    Merging the two fleets brings other problems. US’s Airbus NBs are aging fast with some approaching 20 years old. This adds to the need for AA to replace its MD-80 series. Then both have the B-757s that also will need replacement in the coming years, and the A-321s each has on order are not B-757 replacements. It cannot fill the AA TATL B-757s. On the WB front, AA has some 20 + year old B-767s and th earliest B-777s are approaching 15 years old. US’s A-350s are still several years away. Of the 335 aircraft in the current US fleet, only 35 of them are WBs (including the 8 A-332s on order, but not including the 22 A-350s on order), but the B-734s are now retiring and being replaced by A-321s. The US fleet averages some 13 years old, while the AA fleet of 605 aircraft average 15 years old.

    In 2011, US was rated as having the worst customer service among the top ten airlines in the US by Consumer Reports. They were also rated (in 2011) as #6 of the 19 “most hated companies in America” by Business Insider. Even AA has a better reputation and customer relations than US does.

    I believe this merger is a bad idea.

  2. I would expect some rationalizations fleet wise. The scale of a combined airline makes selecting all types feasible. So probably best of both worlds, redistributing WB’s over the combined networks, retiring the least efficient aircraft etc.

    Probably no new orders for some time to come, unless they need additional 350+ seat aircraft to match the combined network feed to Asia and Europe..

    From a distance it seems DL/NW did a good job, how is UA/Co doing?

  3. To paraphrase Henry Kissinger’s remark on the combatants in the Iran-Iraq war:

    “Isn’t there a way they can *both* lose?”

    Just based on my personal experiences with both airlines…

  4. I hope AA emerges as a stand alone airline. This idea of AA not being large enough to survive is nonsense. With its ATI with BA, its route system, large fleet and the one world alliance, it offers much to air travelers. Doug Parker has stated that if the merger does not go through, US will be fine, the same should hold true for AA.
    US has labor issues many years old and still not resolved and just think of what US management has done with regards to the flying public. They were the only legacy carrier to charge for water,but that was dropped. They I believe are the only carrier to charge a processing fee to redeem frequent flyer miles on their web site.
    US brings very little to AA, second tier hubs, the smallest widebody fleet among the majors and some of the lowest pay scales.
    This is Parkers last chance to run a large airline as he failed with DL and UA. He is promising AA employees the sky and yet they seem to be eating it right up. Look what he has done to US employees, pilots and flight attendants are still battling management with no end in sight. Be careful what you wish for, you might get it.

  5. I just love how the unions at AA think this will solve all their problems and Doug Parker will be taking them to the “Promised Land”…I can practically guarantee after a few years Parker will be the most despised person in AA.

    My view:

    Crandall CEO—->Unions—->”Crandall is horrible-we need someone new, we can live with anyone but Crandall”.
    Carty CEO——–>Unions—->”Carty is horrible-we need someone new, we can live with anyone but Carty”.
    Arpey CEO——->Unions—->”Arpey is horrible-we need someone new, we can live with anyone but Arpey”.
    Horton CEO——>Unions—->”Horton is horrible-we need someone new, we can live with anyone but Horton”.
    Parker CEO——>Why will the unions change their views?

    Funny thing is I was flying back home to SFO and an AA pilot was sitting next to me so we got to chat for about an hour. He actually wanted Crandall to come back..Coincidentally, Crandall recently said the unions made it too difficult for him (and AA as a company) to really progress forward as there was always some kind of “stumbling block” (my words) when Crandall/management dealing with the unions – especially the APA.

    Horton has done a terrific job in restructuring AA and getting it competitive again.

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