AA / US Airways: Analysts decide they like it.

The Dallas Morning News Aviation Blog has this post HERE about analysts beginning to like the idea of a merger between American  Airlines and US Airways.   This marriage occurred to me back in April and you can read my post HERE.  Eric Torbensen at the Dallas Morning News thinks it is a terrible idea and I disagree.

The real reason to perhaps not do a merger between these two airlines is that American Airlines is terrible at mergers.  Their employees don’t embrace them and their executive corps approaches them like predators.  As a result, mergers at AA tend to be plain “consumption” rather than growth or partnership.

Now, if they could embrace a merger, I believe one such as this could be good for them.  First, a merger like this wouldn’t definitely not be sexy.  The sexy merger partners are now fully occupied and, frankly, there was perhaps just one that really would have qualified as sexy and doable for AA and that was Northwest Airlines.  They’re gone. But just because an AA / US Airways marriage isn’t the sexiest thing on the planet and just because it doesn’t necessarily bring the gains that another partner would have provided doesn’t mean that it doesn’t make financial sense. 

This one could.  Look at the route maps first.  US Airways offers a hub presence in two areas of the United States where AA is actually a bit weak.  Phoenix is a nice hub in the web and while it isn’t the strongest hub in the country, it does pretty well.  Yes, Southwest is there but guess what?  AA knows how to compete with Southwest. 

Charlotte is a nice Southeastern US hub that pvovides coverage in area that AA hasn’t gotten much traction.  AA tried having a hub in Raleigh (didn’t work) and has, from time to time, tried to expand Nashville.  It has Miami but that really is more of an international gateway city than it is a domestic hub.   So AA has presence in some weak(ish) focus cities for the SE that the Charlotte hub could change for them. 

So, in terms of a domestic network, it works.  It really is quite complementary to AA’s existing system.

There is some compatibility between the executive leadership of the two companies.  Doug Parker is a former AA manager, for example (and his wife still is an AA flight attendant) and some of the other executive staff has roots in AA as well.  Some that don’t are from Northwest and the cultures between Northwest and American Airlines aren’t dissimilar either. 

But let’s talk about the romantic international part of this.  No, US Airways doesn’t offer much to AA that it doesn’t already have.  It’s US Airways weakest area.  But it isn’t a money loser and there are some hidden benefits.  American can probably either A) redirect feed for those flights to one of their existing gateway cities or B) bolster the US Airways international product and make the US Airways international flights a bit more of a competitor.    The smart team would do both.

There is another benefit:  A more diversified fleet.  There is some overlap between the two companies (737, 757 and 767 equipment but the US Airways mainstay aircraft are Airbus aircraft now.  The A320 series aircraft could be useful to redeploy onto AA routes currently being served by the MD-80 fleet.  The Airbus A330 equipment could be redeployed to AA routes requiring a little more capacity than a 767 but which aren’t in need of a 777′s size or range.

Finally, such a merger would offer Oneworld domestic coverage in areas of the US where it is definitely weak.  The Oneworld alliance leans on AA only in the US and the other two alliances were bolstered by at least 2 airlines domestically.  This is a great opportunity to improve the Oneworld alliance. 

There is value in such a marriage.  The problem is, the people who know how to do this kind of marriage and make it work are at US Airways, not AA.  Doug Parker and Company understand the value of a union like this and know that you embrace the partners strength and use it.  Gerard Arpey and Company come from a school that is more about being a predator and consuming your competition without really embracing them as partners.  Since AA is so much larger than US Airways, it’s Arpey who would lead such a merger and I don’t think he’s the right one. 

Actually, I think Doug Parker could do fantastic things for AA.  If he can succeed with US Airway’s assets and weaknesses, he very likely could do wonders for an airline like AA with its resources.  But the AA board would have to want him and despite the recent flare ups against Arpey from analysts, Gerard Arpey still holds the full confidence of AA’s board of directos.  He isn’t going anywhere anytime soon.

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2 Responses to “AA / US Airways: Analysts decide they like it.”

  1. Just so you know Arpey left AA the day AA filed for bankruptcy.

  2. The commenter should note that this blog article was written in 2010, long before the bankruptcy occurred. And he would know now if he had used a valid email address.

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