American Airlines / US Airways merger

[CHamilton]

AMR, US Airways delay meeting on merger

Posted on February 10, 2013 at 3:39 PM
DALLAS -- The boards of American Airlines parent AMR Corp. and US Airways have pushed back meetings to consider final plans for their merger, Associated Press sources say.

A source close to the matter said Sunday that the AMR board wants to meet in person, and that the US Airways board would only meet after the AMR board approves a deal. The source requested anonymity because the talks are private.

It is not clear when the two boards would finally meet. People familiar with the matter said negotiations are continuing, on issues that include AMR CEO Tom Horton's exact title and role in the combined company.

 

[PRR 60]

AMR, US Airways delay meeting on merger

Posted on February 10, 2013 at 3:39 PM
DALLAS -- The boards of American Airlines parent AMR Corp. and US Airways have pushed back meetings to consider final plans for their merger, Associated Press sources say.

A source close to the matter said Sunday that the AMR board wants to meet in person, and that the US Airways board would only meet after the AMR board approves a deal. The source requested anonymity because the talks are private.

It is not clear when the two boards would finally meet. People familiar with the matter said negotiations are continuing, on issues that include AMR CEO Tom Horton's exact title and role in the combined company.

The present merger-related confidentiality agreements for the key executives of AMR and LCC expire on Thursday, 2/15. That presents kind of a deadline, even though with some effort the agreements could be extended.

 

[afigg]

Wall Street Journal article on the effects of the proposed merger: AMR Stands to Gain Vast Route Network.

The article says that the merger is more to create a huge route than to cull service and flights, but I think most would agree that flight and route cuts will happen if the merger goes through. Air fare price increases on routes where AA and US Airways are the only 2 carriers are inevitable.

With regards to the fate of the two hub systems, the WSJ article states:

There also are questions over whether the combined carrier could support eight hubs and, if not, which U.S. city might be on the chopping block. In most recent airline mergers, at least one hub has suffered deep cuts to its service, such as Cincinnati following the 2008 merger of Delta and Northwest Airlines.
In the expected American tie-up, analysts point to Phoenix as the likely target, partly because it is sandwiched between American hubs Los Angeles and Dallas.

 

[railiner]

The speculation consensus is that, of the existing AA/US hubs, PHX(US) and JFK(AA) may be the most at risk. AA"s hubs at DFW and LAX are likely safe. While there is decent O&D business at PHX, it does not match DFW or LAX. Those hubs are just too important. That makes PHX the odd hub out in the west. ORD likely stays in some form, but AA has always been second fiddle there to UA, so I could see it cut back to a focus. ORD is an expensive operation.
In the east, MIA(AA) will continue to be the primary gateway for South America, and CLT(US) provides the southeast access coveted by AA and is a strong competitor to DL at ATL. PHL has strong O&D and business flying, and the US TATL routes are highly profitable. As long as the City of Philadelphia does not push too hard for a high priced airport reconstruction, PHL should be solid.

JFK could see a cutback since it does not make much sense to operate two TATL gateways 90 miles apart, and JFK (and NYC in general) is loaded with international competition. The shuttle ops at BOS, LGA and DCA will stay (they still make tons of money for US), plus DCA also has a pretty strong domestic non-stop route structure, which gets noticed and appreciated in a politically important city.

I would agree with your views on all but the JFK vs PHL.....AA has an awful lot invested in its new terminal at JFK, has a large maintenance base there, has a large cargo operation there, and while there is a lot of foreign competition there, there is also connection with many of AA's One World and other non-One World code share partners, that depend on AA having a good range of domestic, as well as international destinations. And the New York market for O & D traffic is much larger than PHL's. Being the 'world capital' (UN), JFK is too important to eliminate as a hub....

 

[Steel City Don]

USAirways can go to hell. They are the reason Pittsburgh International Airport, where I work at, is a ghost town, made the county and airport authority build an airport to there specs, they stayed 10 yrs and left.

 

[jis]

The speculation consensus is that, of the existing AA/US hubs, PHX(US) and JFK(AA) may be the most at risk. AA"s hubs at DFW and LAX are likely safe. While there is decent O&D business at PHX, it does not match DFW or LAX. Those hubs are just too important. That makes PHX the odd hub out in the west. ORD likely stays in some form, but AA has always been second fiddle there to UA, so I could see it cut back to a focus. ORD is an expensive operation.
In the east, MIA(AA) will continue to be the primary gateway for South America, and CLT(US) provides the southeast access coveted by AA and is a strong competitor to DL at ATL. PHL has strong O&D and business flying, and the US TATL routes are highly profitable. As long as the City of Philadelphia does not push too hard for a high priced airport reconstruction, PHL should be solid.

JFK could see a cutback since it does not make much sense to operate two TATL gateways 90 miles apart, and JFK (and NYC in general) is loaded with international competition. The shuttle ops at BOS, LGA and DCA will stay (they still make tons of money for US), plus DCA also has a pretty strong domestic non-stop route structure, which gets noticed and appreciated in a politically important city.

I would agree with your views on all but the JFK vs PHL.....AA has an awful lot invested in its new terminal at JFK, has a large maintenance base there, has a large cargo operation there, and while there is a lot of foreign competition there, there is also connection with many of AA's One World and other non-One World code share partners, that depend on AA having a good range of domestic, as well as international destinations. And the New York market for O & D traffic is much larger than PHL's. Being the 'world capital' (UN), JFK is too important to eliminate as a hub....

The projections I am seeing suggest that there is unlikely to be any cutbacks in JFK or Philly. But of course these are all prognostications by those who typically do not have any inside track on information about such things, so to be taken with a large dollop of salt. I can understand that PRR personally would like to see Philly stay put or grow, since afterall it is his primary airport.

 

[Devil's Advocate]

But of course these are all prognostications by those who typically do not have any inside track on information about such things, so to be taken with a large dollop of salt.

This is completely off-topic, but when it comes to comparing a position with salt, It's not about the substance so much as the size. Salt has enjoyed a long and important role in human history, but a single grain of salt by itself remains essentially worthless. So things that are given the relevance of a grain of salt have little if any intrinsic value. When people replace a single grain of salt with a measurement that is millions of times larger they're inadvertently adding far more significance to a position that was originally intended to be precluded from relevance.

 

[CHamilton]

American, US Airways Boards Approve Merger

 

[Devil's Advocate]

I suppose there could still be a Justice Department roadblock or last minute creditor revolt still in the cards, but I don't expect those to be likely outcomes. If this was unlikely to be approved by everyone involved it probably would have never made it this far in the first place. Between AA and US I have around 150,000 miles and I'm starting to wonder if I should be stocking up during the next 100% bonus period or busily liquidating prior to the merger.

 

[the_traveler]

The speculation consensus is that, of the existing AA/US hubs, PHX(US) and JFK(AA) may be the most at risk. AA"s hubs at DFW and LAX are likely safe. While there is decent O&D business at PHX, it does not match DFW or LAX. Those hubs are just too important. That makes PHX the odd hub out in the west. ORD likely stays in some form, but AA has always been second fiddle there to UA, so I could see it cut back to a focus. ORD is an expensive operation.
In the east, MIA(AA) will continue to be the primary gateway for South America, and CLT(US) provides the southeast access coveted by AA and is a strong competitor to DL at ATL. PHL has strong O&D and business flying, and the US TATL routes are highly profitable. As long as the City of Philadelphia does not push too hard for a high priced airport reconstruction, PHL should be solid.

JFK could see a cutback since it does not make much sense to operate two TATL gateways 90 miles apart, and JFK (and NYC in general) is loaded with international competition. The shuttle ops at BOS, LGA and DCA will stay (they still make tons of money for US), plus DCA also has a pretty strong domestic non-stop route structure, which gets noticed and appreciated in a politically important city.

I would agree with your views on all but the JFK vs PHL.....AA has an awful lot invested in its new terminal at JFK, has a large maintenance base there, has a large cargo operation there, and while there is a lot of foreign competition there, there is also connection with many of AA's One World and other non-One World code share partners, that depend on AA having a good range of domestic, as well as international destinations. And the New York market for O & D traffic is much larger than PHL's. Being the 'world capital' (UN), JFK is too important to eliminate as a hub....

I agree that JFK would remain safe. Besides, would AA want to give up all those slots at LHR? I think not!

 

[saxman]

New York is the worlds busiest air travel market. I don't think JFK is going much of anywhere.

But looks like its full on. Being partial to AA and seeing how it's HQ is down the road from me, I'm really glad they are keeping it here. Good luck to all those involved.

 

[railiner]

New York is the worlds busiest air travel market. I don't think JFK is going much of anywhere.
But looks like its full on. Being partial to AA and seeing how it's HQ is down the road from me, I'm really glad they are keeping it here. Good luck to all those involved.

Agreed. I heard somewhere that now they are seriously considering expanding the JFK terminal to its originally designed 59 gates, which was cut back after the last business downturn in the early stages of its construction.....

 

[Texan Eagle]

New York is the worlds busiest air travel market. I don't think JFK is going much of anywhere.

For what its worth, being an AAdvantage and US Airways Dividend Miles member, I got emails from both airlines about the merger news and the one by Tom Horton, CEO American Airlines, mentions this- "Together we will offer our customers more than 6,700 daily flights to 336 destinations in 56 countries by maintaining all the hubs currently served by both airlines."

There you go.

 

[jis]

That is what they always say initially. What they will actually do is another matter altogether.

(null)

 

[trainman74]

Yeah, ask Pittsburgh how good US Airways was at maintaining their hubs after the AmericaWest merger.

 

[Trogdor]

Remember, Southwest Airlines stated they were going to keep AirTran's Boeing 717 fleet when that merger was announced. Now, the planes have all been sold to Delta before a single one will ever carry the Southwest livery.

When the numbers force them to, they will change their mind about keeping all the hubs.

 

[saxman]

Yeah, ask Pittsburgh how good US Airways was at maintaining their hubs after the AmericaWest merger.

Wasn't PIT already pretty much shut down as a hub before the merger with America West? Or at least much smaller than it was back in its heyday? I don't really know, because I never came to PIT before 2007, and by then it was an empty place.

If you're a medium sized city in the rust belt, I don't see you lasting as an airline hub much longer. (CVG, CLE, PIT, STL, MEM) As far as MEM, and CVG goes, they are large cargo hubs for FedEx and DHL/Polar has really built up CVG as a cargo hub as well.

 

[railiner]

Yeah, ask Pittsburgh how good US Airways was at maintaining their hubs after the AmericaWest merger.

Maybe PIT was downsizing already prior to the AW merger, but then look at STL.....I don't think TWA was downsizing it, at least not in proportion to it shrinking as a whole prior to the AA takeover.....

 

[Trogdor]

Yeah, ask Pittsburgh how good US Airways was at maintaining their hubs after the AmericaWest merger.

Maybe PIT was downsizing already prior to the AW merger, but then look at STL.....I don't think TWA was downsizing it, at least not in proportion to it shrinking as a whole prior to the AA takeover.....

TWA was basically dead when AA took over. If AA hadn't taken over, TWA's STL hub would have been downsized 100% within a few months, along with the rest of the carrier (and that's not even taking into account 9/11).

 

[Devil's Advocate]

Yeah, ask Pittsburgh how good US Airways was at maintaining their hubs after the AmericaWest merger.

Maybe PIT was downsizing already prior to the AW merger, but then look at STL.....I don't think TWA was downsizing it, at least not in proportion to it shrinking as a whole prior to the AA takeover.....

TWA was basically dead when AA took over. If AA hadn't taken over, TWA's STL hub would have been downsized 100% within a few months, along with the rest of the carrier (and that's not even taking into account 9/11).

AA simply took their time and waited them out until they were just shy of liquidation. Hard to demand much when you've been left to dangle by a thread. Bravo AA?

 

[xyzzy]

WN didn't sell the 717s to DL. WN is leasing them but retaining title. WN is also paying to refit the aircraft to DL specs.

 

[CHamilton]

The End of Cheap Airfare

Time to shed a tear into your tiny plastic cups of tomato juice, because the merger between US Airways and American Airlines announced last week marks the end of the era of cheap domestic airfares. Thanks to Northwest’s takeover by Delta, Continental’s takeover by United, and AirTran’s takeover by Southwest, and now this, four giant airlines will soon control about 70 percent of the American market.* That’s not exact a monopoly situation, but it does mean that the 30-plus year run of robust competition and ever-falling airfares is almost certainly over.
American Airlines is a much larger company than US Airways, yet it’s in effect being acquired by the smaller company. That’s because the larger company was bankrupt. The new firm will be owned by a blend of US Airways shareholders and American Airlines creditors, and run primarily by US Airways’ top management. US Airways itself was the product of a similar merger back in 2005. It had filed for bankruptcy in 2002 and then again in 2004, and found itself de facto taken over by the smaller America West Airlines. That merger saw America West’s brand subsumed under the better-known US Airways, but it was America West’s CEO Doug Parker who ran the merged entity and who now, with the American merger, will be CEO of the country’s largest airline.
...
A key stated goal of this merger—as in the Delta/Northwest and United/Continental deals—is to reduce “excess capacity” in domestic passenger aviation. That’s a polite way of saying less competition and less service. This will take a few forms. There are currently a half dozen US Airways flights from its hub in Philadelphia to Dallas. Dallas is a key American hub, so American also flies six times a day from Philadelphia to Dallas. The combined entity probably won’t need 12 flights a day to serve the route and definitely will have more power to raise prices than either airline would separately. Smaller cities will also see the pinch. Right now, US Airways and American both serve Tallahassee, the former seeking to route passengers through its Charlotte hubs and the latter through its Dallas and Miami hubs. A merged airline might cut that Charlotte service, figuring that network access through Dallas and Miami is ample to compete with Delta’s service through Atlanta. By the same token, when airlines merge the smallest hubs in the new larger airline tend to lose out and shrink.

 

[jis]

I think what has happened with mergers is right sizing capacity for each individual system while protecting the flanks from destructive competition. Some routes have actually gained capacity as a result, and others have lost capacity. Specially hard hit have been secondary hubs. Gainers have been hub to hub, at least in terms of better distributed capacity if not net capacity. For example Newark to Chicago changed from a mish mash of ERJs and a few mainline flights to regular interval 737 flights as a result of the United - Continental merger.

And in both the case of Amtrak and the airlines we a re seeing a consolidated effort to get fare levels to a point where the service and the fares are sustainable. This while a pain in many peoples' pocketbooks, is probably not an overall bad thing.

 

[The Davy Crockett]

And in both the case of Amtrak and the airlines we a re seeing a consolidated effort to get fare levels to a point where the service and the fares are sustainable. This while a pain in many peoples' pocketbooks, is probably not an overall bad thing.

Agreed. ...With the caveat that they are 'sustainable' with government assistance in BOTH cases.

 

[jis]

And in both the case of Amtrak and the airlines we a re seeing a consolidated effort to get fare levels to a point where the service and the fares are sustainable. This while a pain in many peoples' pocketbooks, is probably not an overall bad thing.

Agreed. ...With the caveat that they are 'sustainable' with government assistance in BOTH cases.

Oh absolutely! The discussion about what is the proportion of government assistance in each case is a worthy one to have, but for the moment I don;t see a huge change in whatever it is. Either way the service have to be paid for. What is negotiable is what proportion is paid by all in taxes in support of sustainable infrastructure as a common good, and what proportion is paid by the actual users in the form of ticket and other user fees.