Why I Want US Airways to Buy American

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.

Don't Keep American My American

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 . . .

Get Posts via Email When They Go Live or in a Weekly Digest

Leave a Reply

93 Comments on "Why I Want US Airways to Buy American"

avatar
Sort by:   newest | oldest | most voted
Gary Leff
Guest
Brett, I think your argument boils down to “a US acquisiton of AA gets the idiots who created the mess out of the drivers seat and puts a competent management team in place.” And that’s the best possible argument for US taking over AA — in terms of making AA a better airline (as an ongoing business concern) than it is today. That’s different, I think, from saying it’s the best possible move for US shareholders.Seems to me that US would do better to keep its lower costs, avoid the mess that requires fixing over at AA, and grow on… Read more »
Derek Pugh
Member
How exactly is US going to grow on its own? With this competent management team in place, I think they have been doing all that they can, but they are limited to who they are. With incredibly strong UA & DL carriers in the US market, it makes it very difficult for an airline like US to grow on its own. So, while they are turning a small profit, there isn’t much growth potential for them. AA is not going to go away, and this move COULD have massive growth potential and return on investment for US shareholders. Is it… Read more »
FRANK
Guest

Major Airlines’ Market Share: November 30, 2011

United-Continental – 22.6%
Delta – 20.8%
American – 15.9%
Southwest-AirTran – 12.1%
US Airways – 7.3%
Total – 78.7%

US Airways-American – 23.2%
United-Continental – 22.6%
Delta – 20.8%
Southwest-AirTran – 12.1%
Total – 78.7%

Source; USA Today Analysis of Data Provided By MIT Data Airline Project

Shane
Guest
“What exactly does US do to fix the cost problems that doesn’t just happen as a result of bankuptcy” Remember that AA IS in bankruptcy right now, although my opinion is that it’s fairly weak based on the amount of assets they have, but that’s for another discussion. The biggest hits will be to labor and lease holders. If US were to come in and offer $1 more to lease holders than they would get from a reorganized AA, then the lease holders can compel the courts to allow the US purchase. US could decide in the process what priorities… Read more »
DesertGhost
Guest
With all due respect to Gary Leff, I think the airline industry needs to shrink, not grow. A airline business plan based on growth is doomed to end in liquidation, unless that airline finds a profitable niche a la Allegiant and Spirit. That’s the nature of mature industries. People point to Southwest, but it took advantage of a bloated airline system with managements stuck in a regulated monopoly mindset. So it thrived. Now, even Southwest is shifting capacity to increase profitability, not growing. Southwest bought AirTran instead of growing in Atlanta. Those moves speak volumes. Looking at history, airlines have… Read more »
Nick Barnard
Member
So the bit I’m really confused about CF is: “you’d probably still see the headquarters in Dallas” “smart management team like the current US Airways group” If I’m the current US Airways management I don’t want to bring all the baggage of American’s middle management. I’m sure that there are effective people there, but I’d wager a small bet that the middle management is as much of the problem as the upper management in AA’s problems. I’d want to sweep them out however possible. Its possible to do a culture change with an existing company in an existing location, but… Read more »
msnflier
Guest

A brief aside on the location of the merged UA-CO’s headquarters in Chicago as opposed to Houston. You’re aware of where the sitting president is from, aren’t you? Enough said. :-)

Greg Robinson
Guest
I am in violent agreement with you on this one. In fact, had I been a board member, I would have called Doug Parker, asked what his price to move was and paid it without any pause. Then I would have asked him to put together the US Airways team over in Fort Worth and get cracking on fixing that thing. The worst possible signal sent in the events of this week was elevating Tom Horton to Chairman & CEO of AA. There is a loud signal there. “We’ll cut costs!” there is absolutely no indication that anyone intends to… Read more »
derek.a.stewart
Member

I agree. When you listen to the earnings calls, the markets seem to like and appreciate the US mgmt team. They seem to be straightforward and honest in their answers and this is why I think they can get whatever money they need in the markets to make this happen.

Derek Pugh
Member

Cranky, some have wondered what this scenario would do to the alliances that each of the current airlines are aligned with. I would assume that this scenario would dissolve the relationship between Star Alliance and US Airways, and help to strengthen OneWorld, by creating a more powerful AA.

Others think that Star Alliance is the greatest of all time, and any airline would be stupid to leave Star Alliance no matter the circumstance.

Can you speak to any of these “other” possible ramifications (alliances, frequent flyer programs, etc.) and how this merger/buyout would help/hurt either airline?

Wayne Rutman
Guest
Not much more to add at this time, because Cranky has said it all. It is Doug Parker’s “manifest destiny” to lead one of the major US airlines, and that opportunity now seems to again be within his grasp. I’m sure he will do everything he can (at least everything rational) to achieve that goal. If given the chance, LCC management will rationalize AMR and restore it to its former glory and — this time — actually make it consistently profitable. The wildcard in all this is fuel. Current oil prices are nuts, and have nothing to do with fundamentals.… Read more »
David SF eastbay
Member

“””””Now it’s your turn to rant about why I’m wrong . . . “””””

That last line is the greatest.

No way you can be proven wrong yet since only the future will tell. Who knows maybe the day will come when AA will need to go the way of others and sell off pieces of itself. Sell off Latin American to someone, sell it’s LHR slots to someone else. Gee why did Carl Icahn just pop into my head…..lol

Turbo
Guest
If you’re looking to build an airline from scratch, why not start in New York? Why not take JetBlue’s brand equity and nice facility at JFK and build off that? Take the best of US Air and the best of AA and combine all three into the new JetBlue – it already has excellent penetration in the best US market and you’d get a chance to fly a product that can compete effectively against the duopoly of UAL and DAL? Make JetBlue a 2-class carrier on the lines of how AirTran successfully sold itself to biz fliers domestically and for… Read more »
Nick Barnard
Member

Interesting theory, but I doubt you’d be able to get JetBlue’s owners to go along. LCC & AMR would like to have NYC’s feed, but I figure they’d rather leave that to JetBlue and do a codeshare/interline agreement.

FRANK
Guest

downsize PHL?….why!!!!!

By the numbers, US Airways’ Philadelphia hub effectively collects passenger traffic out of the Northern and Eastern United States to Europe, and generates more revenue to and from Europe each day than American does at either New York’s JFK or Chicago’s O’Hare airport.

DesertGhost
Guest
“Now it’s your turn to rant about why I’m wrong . . . ” That’s fine, except for one minor detail. I think you’re right. But I do have a slightly different view of the ultimate shape of the “new” American Airlines. I have no inside financial information so, of course, I could be absolutely wrong. But one thing I do know is that the current US Airways management has the courage to make the tough choices that will need to be made. So here goes: New York: I see it being restructured, not abandoned. I believe that New York… Read more »
Nick Barnard
Member

The distance restrictions on flying from the Wright amendment lift in 2014. However, its replaced with a gate restriction, of which Southwest has most of the gates.

DesertGhost
Guest

Nicholas, I understand that. I’m saying a temporary relaxation of the Wright Amendment may be needed in the specific cases I mentioned. US and AA are the only airlines serving these three routes at present. I doubt the government would want a monopoly on any of them, and they don’t fit well into other airlines’ route structures.

Sanjeev M
Guest
WOW. I hadn’t liked the idea of a US-AA merger, but if this is the way to get new management, then lets go for it. @DesertGhost AA doesn’t fly to TLV due to some old issue with TWA staff. The internet will tell you more. Also probably the major winner out of such a deal would be AIRBUS. This solidifies the megaorder and maintains their loyal USA customer. I see plenty of AIRBUS financing coming to US like it did during their BK. JFK and PHL could be for this new carrier what EWR and IAD is for United. AA… Read more »
marshall
Member

CF,

Spot on! I’ve been saying the exact scenario you laid out was going to happen for 3 years, and about all I’ve gotten is a “you must have 9 heads” stare of shock.

MJ

rayuribe
Member

Other comments pretty much covers a lot of views, good and not so good. My only contribution is to set Cranky straight that American Airlines headquarters is in FORT WORTH, while Southwest Airlines is in DALLAS.

NYC Dude
Guest

All I know is that if AA and US merge, them I’m moving my Executive Platinum-level business to UA or JB heck, even WN. I just don’t like US, sorry.

But then again, I’d give NetJets 100% of my business if I could get my client to pay for it. :)

Consumer Mike
Guest
Cranky, as you say, it is anyones guess what the results of the AA Chapter 11 action will do to AA. My thinking is that the on-going labor problems at US AIR may undermine any merger plans as why would any sane person want to couple those never ending tong wars with the labor issues at AA? PLUS, never forget what the existing AA Union and management did to the TWA personnel after the “merger”. It turned out to be an employee massacure of the worst kind. AA was merciless to the TWA personnel. I do not see a clean… Read more »
longtimeobserver
Member

A great option for US. Not a solution for AA (and oneworle) competing with DL, UA (and their alliances).

SAN Greg
Guest

Why you are wrong? Easy: Customer service in Philadelphia. Redefines pathetic!

Lori Bond
Guest

Why shutdown Eagle, per the sec filing they are making money at current market rates. They provide about 10 points on the loads for AA. I think their is value in Eagle, just not managed properly.

Nick Barnard
Member

I’m not sure of the exact arrangement between AA and Eagle, but I’d bet that it is a capacity purchase agreement. Basically, AA pays Eagle a set price to fly the plane from point A to B if the plane is full or empty. AA sells all the seats and keeps all the money and profits, as well as the losses. AFAIK, there are other regional jet operators out there that can do the same thing at significantly reduced rates.

Don
Guest

Why not just have them buy JetBlue and do exactly what they do. Then they get 100% of the profits instead of a stronger interline. They would just have to get more employees. They already have the orders from Airbus coming.

Nick Barnard
Member

Because part of JetBlue’s value proposition is the onboard product. AA couldn’t put PTVs on board all of their planes fast enough, and it’d be inefficient to keep the JetBlue fleet segregated. Not to mention I’m unsure if JetBlue would be profitable at anywhere near AA’s labor rates, or somewhere above theirs and below AA’s.

Phill
Guest
Cranky, I rarely think that what you write is completely false, but I’m calling you out on this one. I think you severely minimize the problems that US is having with labor and pilots and if AMR would be thrown into the mix with their own management-hating labor force it’d be nothing short of disastrous. Also, getting rid of AMR’s New York hubs? Outrageous. JFK’s international flying is still great for AMR (even after starting that bizarre Budapest route to try and content Malev…). Domestic is always full in and out of JFK for the routes they do have and… Read more »
CP
Guest
The part of the argument that perplexes me is why the on-board product would improve. I can acknowledge that US’ on-board product has been improving (i.e., it’s now been a year since I’ve been on a US plane with holes in the seats, as was common on the old “eastern half” fleet post-merger), but in both coach and first it is FAR behind AA’s offerings. This is especially true in first class. For instance, I recently flew a US flight in first from PHX-STL that departed PHX in the 6p (aka, dinner!) hour. The service on-board was a snack basket… Read more »
Derek Pugh
Member
One place that might truly benefit from this is, funny enough, Dallas & Southwest Airlines. AA has been the been the BIGGEST funder/supporter of the Wright Amendment by far. The other big supporter is the city of Fort Worth, since AA is technically HQ there. If AA is actively trying to shrink it’s DFW operation (which they probably will do some of), WN may have a pretty good case to legislators that they are ready to pick up the slack. US/AA may also want some gates at Love Field for business travelers to other hubs, thus try to get gate… Read more »
Jeff
Guest

I would not like this merger to happen purely for selfish reasons. It would decrease my options of flying direct PHX-DFW to one airline instead of two. Southwest does not fly direct because of the stupid Wright Amendment. It would also mean the loss of the Corporate Headquarters in Tempe which would mean more lost jobs in an area that has already been hit hard by the economic collapse.

PF
Guest

In reference to “undoubtedly a better onboard product,” – for US or AA? I find AA service in F to be among the best, and Y isn’t bad (except everything including peanuts being “for sale”) – AA Y will serve a full can of soda on a flight, (which BTW is more than Eagle – 1 service, 1 cup of soda, 3 hour flight).

Mav6996
Guest
US Airways, no pun intended, comes with too much baggage. I’m not sure that the 5000 US Airways pilots would acquiesce to the will of the 10000 American pilots in a merger as easily as your analysis portrays it. While US Airways has cobbled together a profitable airline, there’s still a bit of animosity between the two groups. I don’t think that would go away in a possible merger and might actually intensify with the American pilots. I would be more inclined to favor a tie up of American with JetBlue. The advantages are a younger pilot base, a strong… Read more »
Nick Barnard
Member

I’m really curious what percentage of the East pilots are fed up with their new union and just want to get a raise and go on? I’d be interested in seeing the results of a truly anonymous survey among the pilots. I kinda think a few rabble rousers got everyone whipped up and sold them a bill of goods they can’t deliver on.

AFAIK AA has a completely separate pilots union. So that’s be interesting.

David M
Guest

The US East pilots wouldn’t have a choice. With double their number at AA, plus the West pilots likely siding with AA pilots against East, I can’t see how USAPA (US Airline Pilots Association) wins a vote to continue representation. Pilots at a merged AA/US would most like be represented by APA (Allied Pilots Association), the current AA pilots union, though I could see ALPA (Air Line Pilots Association, International, representing pilots at 37 US and Canadian airlines, and represented America West and pre-merger US Airways pilots) making a play for them.

Cactus Jack
Guest

Karma is a B! The pompous East pilots will get a chance to experience what they did to AWA pilots when suddenly they are so out numbered by AA!!! Poetic justice!

Jim
Guest
I don’t see how you can call being bailed out by the federal government “financial wizardry”. Also, I don’t see any reason why labor unions at US and AA would be able to agree on anything. Just because US pilots would be outnumbered by AA doesn’t mean that they have to agree to what AA’s pilots want. In fact, as you say in your article, the whole reason US and America West’s pilots couldn’t come to an agreement was because US had far more pilots, who then decided to trample over America West’s union. Who is to say AA’s pilots… Read more »
Nick Barnard
Member

Jim, the US pilots integration was exceptionally messy. I won’t rehash it but go look up Nicolau award for the messy details. The crux of the matter is they were originally from the same union and the larger pilot group felt shafted an formed their own union to represent everyone, resulting in a huge mess.

When unions are different in an airline merger the employees vote which union represents them. Since there are more AA pilots than US pilots the AA pilots union likely will win.

drybean
Member

Brett is obviosly too close to US Airways to write objectively about a possile merger and who survives, but some of what he says makes sense. However under Brett’s scenario, dozens of AE cities would lose air service… more than two dozen in Texas alone. And something Brett needs to know, AA’s headdquarters is in Fort Worth (where the West begins) and NOT in Dallas (where the East peters out)…

longtimeobserver
Member

Not that it matters much to any but the old money Fo-uht Wuth crowd and the all-hat-no-cattle nouveau-Dallasites.

Derek Pugh
Member
Just because AE is either sold off or closed, doesn’t mean that the 2 dozen cities in Texas will lose air service. I can only think of a slight few that only have AE air service in Texas. Plus if the routes are profitable, US/AA or someone else will come in and fly them (like Sky West flying for them, etc.). The airline shouldn’t be flying unprofitable routes, as this LOSES money. If the feds or city want to subsidize it, fine, but it is not an airline’s responsibility to provide service on a route that doesn’t make money. And… Read more »
akira
Guest
Hope I’m not too late to join the party. This makes me wonder, when Parker was heralding “one merger left in the industry” last summer, if it was an open invitation for AA to hurry up and declare bankruptcy. If there is UA/DL/AA left as merger partners for US, I don’t think it takes too much analysis to say UA/DL do not need any more scale with a merger, even in the medium/long-term considering the quantity of their hubs. And AA bringing in an Airbus order while previously being all Boeing…hmm. Yes, dumb spectulation, but throwing it there for craps… Read more »
Eric
Guest
The conventional wisdom on The Street and industry blogosphere is that US and AA are destined for each other…and somehow B6 will mesh into the mix. While I agree that Dougie and Scott would be the first string team to fix this disAAster, I still do not see how the network synergies work. Lets say we go with the JFK/PHL hypothetical domestic/European split stream mentioned above. Then you have the DCA megafocus just down I-95 (and lets be real, the DOJ is going to require allot of slot divestment). Further down the road, you have CLT…which as CF points out,… Read more »
Bill Hough
Guest
On this issue, I find myself agreeing with Michael Boyd, who writes in his analysis: “US Airways, a fine operator, does not offer much to the AA system. The Phoenix hub is not particularly additive to AA, the PHL hub is competitive with the AA JFK operation, and CLT would mainly offer access to more small markets – which are difficult to serve economically. AA already as access to traffic at most mid-size and larger markets in the Deep South. As for feed – much of the international markets at CLT would compete with AA service at ORD, JFK, and… Read more »
Eric
Guest

I agree Brett…STL and MEM are ideal places on a map…but with weak local economies they are unsustainable.

I am looking at the US/AA hub issue as an aggregate: it just seems to me that you would have a combined entity competing with itself in the east. In the west you get one anchor with ALLOT of competition for premium dollars (domestic and foreign) on one end and another with LCC competition/so-so yields and a local economy that is known for wild boom/bust gyrations.

MeanMeosh
Guest

The only thing I still don’t really get is the issue of service levels. Cranky, you tried to explain in one of the comments, but I’m slow and not completely following. It seems like you’re saying that US would up its service levels to match those of AA. Wouldn’t that blow US’s existing cost structure out of the water? Or would you have this weird “airline within an airline” thing where the “legacy” US continues as a hybrid full-service/LCC while AA continues more or less unchanged? That just seems like a disAAster waiting to happen.

tharanga
Guest

Besides HP, who actually ended up receiving federal govt aid after 9/11? I know not everybody ended up getting it, that wanted it.

kelty
Member

Nobody has mentioned the possibility of merging two independently viable airlines, i.e., US with Alaska. That would create a route system from Europe to Hawaii.

Of course, that doesn’t solve the problem of what to do with AA which provides some competition for UA and DL.

Graham
Guest
As a former AA elite, and a current US elite, this really would be the best of both worlds. However, while I agree with the fact that “American’s labor trouble couldn’t get worse so why not merge” argument, I wonder how Doug and team would fix it. Dealing with labor hasn’t been US’s strong suit that I’ve seen, so I wonder how ready they would be to take on even larger headaches. Employees are the keys to a successful airline. More than planes or product. Employees and how they treat you retain elites and create new customers. So I would… Read more »
trackback

[…] I don’t think anyone was surprised with American Airlines’ Chapter 11 bankruptcy protection filing.   You can read my quick take on that over at the Business Journalism blog.  But every time there’s an airline bankruptcy filing, there’s the inevitable airline merger speculation.  And in my humble opinion, no one did it better last week than Brett “Cranky Flier” Snyder with his post — Why I Want US Airways to Buy American. […]

trackback

[…] 11 bankruptcy protection, the chatter about it merging with US Airways began.  Last week, I linked to a post from Brett “Cranky Flier” Snyder, who gave his reasons on why he thought this was a good […]

trackback

[…] Delta isn’t entirely interested in walking away with all of American. Remember when I first wrote about how US Airways should buy American, I suggested that maybe US Airways wouldn’t have much interest in LA or New York? Well, guess […]

kevin
Guest

brett,everything you said is exactly on,when you look of the usair of old,as recently a three years ago,not sure who got fired and who got hired,but the remarkable turn around the last three years is top notch,just look at there website,look at the new things they are either adding or changing,especially the food,i compliment usair,and your right usair would be a great fit for american

Bob
Guest

Bret, what do you think would happen to the PHL hub? I am a US Airways flyer, and I would love to see a merger, especially since the AA pilots are backing it.

Scott Dixon
Guest
I was looking at this comment again now that a US/AA merger seems the most likely scenario. The major “unknown” issue that you mentioned in this blog has apparently been resolved with the AA and US pilots agreeing to a memorandum of understanding. I think this union would be a win-win as you outline. I wonder if they might try to compete in LA and NYC, rather than pull back as you suggest, in order to attract more premium travelers. I’m not necessarily saying it would be a successful effort, but I wonder if the new largest airline US/AA would… Read more »
Scott Dixon
Guest
CF you make some good points. And yes I did mean US/AA (not UA/AA). Domestically AA will have a much stronger network after combined with US. I’m assuming they will have the largest share of the domestic market. Moving to international, as you did, Pacific will definitely be their big weak spot. Getting Alaska Air down the road would definitely boost their presence in Hawaii and would be a big boost with their domestic network in the west. UA has the strongest network of the big 3, I believe, out west. The west is also Delta’s weakest area as they… Read more »
Scott Dixon
Guest
So the topic has been brought up: NEXT MOVES, assuming AA/US happens. The remaining second tier airlines (other than Southwest) are Alaska Air, Frontier, and Jet Blue. Alaska Air, IMHO, would be a coup for Delta. Delta would now be #3 and its network out west is the weakest of the new big 3, I believe. They have the strong Pacific network and are building a mini Asian gateway at Seattle, Alaska’s biggest hub, so it would be a natural match to get the full benefit of that feed beyond the alliance they have with Alaska right now. It would… Read more »
Derek Pugh
Member
I doubt that AS or B6 are necessarily trying to merge or be bought…They are good at what they do and are profitable… I think after the US/AA merger things will die down a bit. You will have the big 3 of UA, AA, and DL… The niche carriers HA, AS, B6… Southwest still trying to pretend to be a LCC…and the low cost carriers F9, NK, G4. F9 will probably be bought by somebody, but everything else will settle into where the market needs to be. (Who the heck knows what will happen with VX) But I doubt anything… Read more »
longtimeobserver
Member

B6 is vulnerable for its low valuation and failure to perform for shareholders for more than five years. By contrast, look at AS’ stellar performance.

Scott Dixon
Guest
Good points by both D-ROCK & AirBoss. Regarding the comments that neither AS/Alaska or B6/Jet Blue are trying to be bought, one could argue AA has not wanted to merge or be bought, either, yet it’s apparently about to be bought by a smalller airline US. Unless any of the remaining airlines are privately held or have some other legal/operational issue preventing a merger, I’d say just about any airline is up for grabs, especially since after going thru their respective bankruptcies the big legacy airlines have cut their unit costs so that they are much nearer that of the… Read more »
Scott Dixon
Guest
OK, the AA/US merger is pretty much a sure thing! News reports tonight are that the boards of both airlines approved the merger and tomorrow/Thursday there will be an announcement. This brings me back to what is going to be the next airline merger in the USA? I agree with AirBoss: B6/Jet Blue is ripe for takeover. Low valuation and declining route performance. I see Delta buying that airline. It would be relatively easy because if anything Jet Blue is even less unionized than Delta. Only problem might be that the government might make them shed a few routes at… Read more »
Scott Dixon
Guest
There were a few comments here about St. Louis and AA’s hub there which they inherited when they bought TWA. I think they bought TWA mostly for its planes and to become more competitive at JFK and to Europe. At the time they said that STL was a good alternative “reliever” connecting airport to ORD since that hub was so congested and slot restricted, lots of air traffic delays, but they bought TWA just a few months before 9/11, which could not have been predicted. Then post 9/11 air traffic at ORD and everywhere took years to recover, so congestion… Read more »
Scott Dixon
Guest
I just found some comments in a very interesting article on dallasnews.com about why AA dismantled its STL hub after buying TWA. Pretty much goes in line with my comments above that 9/11 left AA with less need for its new STL hub. The excerpt below is from this link: http://www.dallasnews.com/business/airline-industry/20130126-american-airlines-battles-a-history-of-unsuccessful-mergers.ece “….(Swelbar, a research engineer at the Massachusetts Institute of Technology?s International Center for Air Transportation, said American had been looking for a way to relieve its overcrowded hub at Chicago?s O?Hare International Airport, where nearly 40 percent of American?s flights had arrived at least 15 minutes late in June,… Read more »
Scott Dixon
Guest
I was re-reading the very informative article I quoted above, http://www.dallasnews.com/business/airline-industry/20130126-american-airlines-battles-a-history-of-unsuccessful-mergers.ece and noticed some interesting facts about AA’s past hubs and fleet size. Then I looked at AA’s past 10-K statements filed with the SEC and it’s interesting to see how their fleet has shrunk to less now (605 per Wikipedia, 608 per its 10-K of 12/31/11) than it had way back in 1992, when AA had 672 planes in its fleet. Looking at AA’s fleet numbers from past 10-K’s for recent years compared to what it had just before and after its TWA acquisition: On 12/31/2000, right before buying… Read more »
Scott Dixon
Guest
I have to doubt strongly that AA/US will be the last domestic airline merger for the rest of time. So which one will be next, and who will be the buyer? Sounds like AirBoss thinks B6/Jet Blue might be the next? Delta is the most likely buyer for that airline, INHO. Another point I’d like to make: just because Alaska or Jet Blue are highly rated by fliers or profitable does not completely rule them out as a candidate for a buyout. IIRC, America West was highly rated before US merged with them, as was Continental before merging with United.… Read more »
Scott Dixon
Guest
Oops, I must correct myself after re-reading AirBoss’ latest post. It sounds like we have a vote for F9/Frontier being the next airline that’s bought, not B6/Jet Blue. My apologies for initially mis-reading AirBoss’ post. That’s what I get for scanning quickly instead of reading carefully. AirBoss, your arguments have a lot of merit. But what about Republic having bought Frontier so recently? Are they trying to unload Frontier already? Or does it not really matter? Wouldn’t there be possible issues with Republic’s status as a commuter provider for some of the big 3 airlines? Or would it actually help… Read more »
wpDiscuz