Every time I bring up the idea of US Airways buying American, I hear gasps of horror at the mere mention. (See Gary Leff’s piece yesterday for an example.) But in my mind, there would be nothing more exciting than seeing US Airways buy American out of bankruptcy and turn into a new, powerhouse American Airlines. I shake my head at people who thought American should have bought US Airways before just for the sake of merging. That would have made no sense. This, however, would be a great move.
The first thing to clear up is the basic philosophy. You’re not going to see American turn into US Airways if this happens, though you’ll hear plenty of speculation along those lines. The management team isn’t tied to any model in particular; it’s tied to making the best out of each situation. When this same team came from America West to take over the old US Airways, it realized that its best hubs still couldn’t match the revenue production of the power hubs that the Big 3 operated. So it had to focus on keeping costs down in order to remain profitable.
That is not the case at American. This would look more like American than US Airways when all was said and done. In fact, I’m sure it would still be called American and you’d probably still see the headquarters in
Dallas Ft Worth. If this sounds similar to when US Airways tried to take over Delta, it is. We just never got to see what they could have done with Delta.
What would they do with American? There are so many things that run through my head. You can bet that plenty of airplanes in the fleet would be sent packing. Eagle would have to be sold off if anyone would even want to buy it. If not, it might just be shut down. That wouldn’t surprise me in the least. And who knows what would happen to the maintenance division. Big changes, I’m sure.
From a network perspective, there’s a lot that can be done. I don’t imagine we’d see dramatic changes in Chicago, Dallas, Philly, and Washington, but other places would probably look at lot different.
In the southeast, the airline could get Charlotte and Miami to play off each other. Miami gets more of the Latin/Caribbean flying that it excels at supporting and Charlotte continues to be the only true competitor to Atlanta for southeast US flying. Those two hubs can work very well together.
As costs rise to somewhere between US Airways and current American levels, Phoenix will likely be scaled back, but the operation there will allow American to pull back in LA a lot. There is no reason that those big regional jets should be flying around there. LA should really just focus on the big business markets that American needs to serve for its corporate clients.
Then there’s New York, where the biggest changes may occur. American is not a truly major competitor in New York anymore. I would actually suggest that American keep the slots needed for major business destinations, but then sell off the rest to JetBlue and enter into a stronger partnership. This is kind of funny, because had US Airways not just traded its La Guardia slots, it might be a different story.
Today, a full quarter of its JFK slots are used for Latin/Florida/Caribbean (and I’m excluding Miami hub flights from that). These are markets that are better served by JetBlue. There are also a bunch of one-off RJ flights feeding the small European bank. Kill ‘em. American simply is not going to compete with United or Delta in New York as they continue to bulk up, so it’s time to focus elsewhere while keeping only the routes that are commercially necessary.
But I’m getting off track. Maybe I’m off base with these changes, but the point is that when you get a smart management team like the current US Airways group in there, they will review everything and do what needs to be done. There isn’t much route overlap, but there is opportunity to optimize what’s out there without question. That’s exactly the kind of sandbox that these guys need. This team isn’t bound by tradition or legacy – they just want to make a better, more profitable airline. They’ll make the hard decisions that the current team likely won’t even consider.
A team with a track record like the current US Airways team will find plenty of money pouring in from the outside to help its cause, and that’s huge. If US Airways starts losing money again thanks to rising fuel, dropping demand, you name it, it doesn’t have much ability to raise more cash on its own. But it would have plenty of money being thrown at a merger with American, and that would give the combined airline some great breathing room.
Remember, these guys never put an airline into bankruptcy. They’ve relied on some skilled financial wizardry to make things work. Doug took over at America West right before September 11 and successfully steered the airline into a federal loan guarantee to keep the airline afloat. The feds made their money back on that one after the airline turned around. (I was quite proud to be a part of that.) Then they pulled US Airways from its last and final bankruptcy (it wasn’t going to escape alive) only to turn it into a modestly profitable success.
Just think what they could do with American.
Many, seem to think that this wouldn’t work because of the US Airways track record in dealing with labor. Oh please. The biggest labor problem at US Airways is that the East pilots went out on their own and trampled over the West thanks to their greater numbers. The issue is within the labor groups, not with management even though many like to point their fingers the wrong way.
A merger with American would fix that right up. The 5,000 US Airways pilots would be quickly outnumbered by the roughly 10,000 American pilots and there might actually be a chance at finding labor peace with a unified union running the show. (I said “a chance.” The American pilots have been pretty irrational in their own right.) But it’s not any worse with the US Airways folks in there than it is without. American is a mess today, and labor relations can’t get much worse. I’d say they could get better with a chance at stronger revenues (which means the potential for profit sharing) and a new team to sweep out the old baggage.
At the end of the day, the industry would end up with a leaner, meaner, and more competitive American Airlines. For travelers, it would mean a better network, undoubtedly a better onboard product, and just a better airline in general. It would add some of the strengths from the US Airways network along with a management not bound by any preconceived notions about what can and can’t be done. It would strengthen oneworld as a competitive alliance while putting a little dent in Star’s US coverage.
Is this even possible? I have no clue. We’ll see how the bankruptcy proceedings unfold. But I think it would be the best possible outcome. Now it’s your turn to rant about why I’m wrong . . .