American and US Airways Give Up Very Little to Gain Merger Approval

So much for taking a writing break this week. I’ve reshuffled this week’s sponsored posts because of yesterday’s big news: American and US Airways will now be allowed to merge thanks to a deal with the Department of Justice (DOJ). (You can read the full settlement here.)

While the deal itself is full of a lot of promises and divestitures, it’s mostly just fluff. Basically, the airlines did exactly what we all expected before the lawsuit was filed. They gave up a chunk of slots at Washington/National Airport, a few at LaGuardia, and that’s really about it. Oh sure, there was more, but none of the other stuff matters. Of course, that won’t prevent me from talking about it.

AA US Merger Approvedsmall city service will remain largely intact thanks to an agreement with the Department of Transportation (DOT). Overall, the new American will still be slightly larger than US Airways is alone today at National.

Who will get these slots? Certainly Southwest and JetBlue are drooling over them. Virgin America and Alaska might be interested, but none of these slots can be used for flights beyond 1,250 miles, so that eliminates what you’d expect them to do. Spirit recently gave up its National slots in favor of Baltimore, so that’s unlikely. Maybe a little guy like Sun Country would try for it, but really, JetBlue and Southwest will be the big winners.

Give Up 12 Slot Pairs at New York/LaGuardia
Not that either airline holds any sort of dominant position at LaGuardia, but DOJ saw this as an opportunity to open up slots anyway. In this case, you may have heard the airlines have to give up 17 slot pairs, and that is true. But five of those are already operated by Southwest and will now be offered to them for sale. So it’s a net reduction of 12 daily roundtrips from where American and US Airways are today. That’s not a lot.

Where will those 12 come from? There are so many options. I’d probably start in Charlotte where US Airways operates 13 a day and American has 5. For the rest, does American need 6 flights a day to Columbus? Does US Airways need 13 to Philly? It won’t be hard to cut that back as needed, so this is pretty minor.

Give Up 2 Gates in Miami
US Airways will have to give up two of the gates it leases in Terminal J in Miami. This is pretty laughable. Who is going to want those? No low cost carrier I know wants to touch that airport. And I haven’t heard about international carriers having trouble getting space.

Give Up 2 Gates at Dallas/Love Field
Wait, American still has gates at Love Field? Yep, it does. It has 2 gates even though it doesn’t fly there anymore. It was supposed to resume flying after the new terminal is fully open, but please, we all know that was just a way to sit on gates so Southwest couldn’t use them. The gates are currently leased out to Delta, but I would expect that Southwest would find a way to gobble them up and further dominate that airport. That’s right, this divestment would actually hurt competition if that plays out.

Give Up 2 Gates in Boston
This was another one that I had no idea was constrained. JetBlue seems to be having no problems growing its operation mightily, so is there really an issue if a new entrant wanted in? Neither American nor US Airways have to care very much about this. I’m sure they’ll be able to run their operation just fine from 2 fewer gates.

Give Up 2 Gates at Chicago/O’Hare
I liked this one, but I expected it to happen anyway. With US Airways in 5 gates in Terminal 2 and American dominating Terminal 3, it didn’t seem like it would make much sense to keep those few gates. But then I saw in the settlement that they’re actually talking about giving up gates L1 and L2 (combined from L2A/L2B) in American’s Terminal 3. That’s a surprise, but it’s also not an issue. This is good since O’Hare is gate-constrained and it frees up some openings for others. But it should have no impact on the combined airline.

Give Up 2 Gates in Los Angeles
US Airways was scheduled to move to Terminal 3 at LAX so that Southwest could take over all of Terminal 1, but the move hasn’t happened yet. Still, US Airways is giving up rights to gates 31A and 31B in Terminal 3. That means nothing since American is going to want to consolidate its operation in Terminal 4 and the Bradley Terminal anyway. And it’s that Bradley Terminal where American is supposed to get more gate space once the current expansion is fully opened next year. But this gate cut may actually benefit American. It gives the combined airline the ability to cut back on flying a little in LA since it will have 2 fewer gates. It might have wanted to do that anyway but couldn’t because…

Maintain hubs in Charlotte, New York/JFK, LA, Miami, Chicago/O’Hare, Philly, and Phoenix for 3 Years
This might sound like quite a commitment, but it’s what the airline was planning anyway. Now it just has to keep service at the same historical levels it has had previously, after accounting for the above divestitures. US Airways has publicly said that it sees LA and New York as important points for local traffic. I had expected to see reduced flying in those cities (not that it would really be a competitive issue in these markets), but now that won’t happen for three years except in LA where the 2 fewer gates mean they can cut a little. Instead, we’ll see flying levels stay where they are, and I would expect to see the destinations and frequencies change around a fair bit. The rest of the hubs have never seemed to me like they should be in danger anyway. But if they are, well, then in 3 years they can go away anyway.

Maintain Service From 1 Hub to Each Currently-Served Airport in 6 States for 5 Years
Remember, it wasn’t just DOJ in this lawsuit but some states as well. This provision basically gives these states what the combined airline already offered in Texas to get that state’s attorney general to pull out of the lawsuit. The list of cities served by at least one of the airlines today is:

  • Arizona – Flagstaff, Phoenix, Tucson, Yuma
  • Florida – Daytona Beach, Key West, Ft Lauderdale, Gainesville, Jacksonville, Orlando, Miami, Melbourne, West Palm Beach, Pensacola, Ft Myers, Sarasota, Tallahassee, Tampa, Ft Walton Beach
  • Michigan – Kalamazoo, Detroit, Flint, Grand Rapids, Marquette, Traverse City
  • Pennsylvania – Allentown/Bethlehem, Wilkes/Barre/Scranton, Erie, Williamsport, Harrisburg, Philly, Pittsburgh, State College
  • Tennessee – Nashville, Chattanooga, Memphis, Tri-Cities, Knoxville
  • Virginia – Charlottesville, Washington/National, Washington/Dulles, Lynchburg, Norfolk, Newport News, Richmond, Roanoke

Remember, this just guarantees the airline will serve each city from at least one hub with daily service, so it can adjust service levels as it sees fit. It just can’t pull out completely, but American wouldn’t want to do that anyway.


So that’s the deal. There are a lot of promises in here, but these are things that I can’t imagine the combined airline wanting to break even if it could. This agreement says nothing about controlling so-called Advantage Fare pricing or about the 1,000 plus markets that DOJ said would be too concentrated after the merger. The way I see it, DOJ didn’t like its chances of winning enough to take this to trial. Instead, it crafted a deal with all kinds of fluffy promises that made it look like it was protecting consumers. It tried to save face, but that’s quite a thin veil. If I’m at DOJ, I’m hoping people don’t see through the fluff and think that something amazing has been done here.

At the same time, the combined airlines were nervous enough about their chances of winning in court that they decided it was worth it to give up slots to avoid the chance that they lose entirely. If I’m at American/US Airways, I’m pretty happy with this deal. In fact, I would have been happy before the friggin’ lawsuit was filed in the first place. But hey, at least the lawyers are all rich now, right?

Of course, if I’m at JetBlue or Southwest, I’m pretty damn happy right now since I’ll get more slots in congested airports. If I’m Southwest, double bonus! I have a chance to increase my dominance at my home airport, Dallas/Love Field. That’s particularly helpful since, by agreement, they are prohibited from physically adding new gates.

Now it’s time for the fun part. I’ve always believed that this merger was a good idea. But good ideas don’t always get implemented properly. Once this closes in December, it will be time to turn the microscope on to the integration. Let’s see if they can do this better than others before them.

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78 Comments on "American and US Airways Give Up Very Little to Gain Merger Approval"

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JohnBom
Guest

CLT-NYC fares are kept in check by B6 even though they only fly CLT-LGA. Maybe they’ll shift the capacity over to to CLT-JFK for more international feed.

noahkimmel
Member

b6 seres CLT-JFK (no LGA)
DL/US/AA service CLT-LGA
US serves CLT-JFK

I’ve been flying this route weekly for awhile, and fares are cheap ($120 each way with 2 weeks notice for monday morning/thusday evening). B6 is actually on the expensive side when I look.

I see US upgauging some of the e190 / a319 frequencies to a320/321, and DL upping cr7s to CR9s.

AC
Guest

As a Chicago-based AA flyer, I think this is great news. I prefer AA to US at ORD and hopefully this strengthens/cements their hub operation. I have family in NH and am delighted that I’ll soon be able to fly AA metal to MHT. I think AA has made some great recent progress – new planes, better moral of employees, and in-flight catering that far exceeds the competition. I just hope that Doug Parker leaves this service enhancements that have made AA my airline of choice. Good luck to both organizations and their employees.

Nathaniel
Member

I hope AA competes on the MHT-ORD route and drives prices down a little.. I think United has gotten a little.. Complacent.

hsano
Member

I do most of my flying on UA, so I was surprised to here that AA didn’t offer ORD-MHT service on their own metal. Can you please clarify a little? Is there only connecting service? American Eagle service? Thanks!

MilesAbound
Guest
Just looks like a transfer of wealth from the US taxpayers to the lawyers working with the DOJ. What a bunch of absolute idiots at the DOJ. If there was any accountability in government, which we all know is a big laugh, they’d all be fired @JohnBom you are absolutely right. When I moved to RDU in 2006 flights to LGA were typically $700-$1000 round trip on a consistent basis. As soon as B6 started service to B6 prices dropped to $200-400 overnight and have pretty much stayed there since, maybe creeping up to $300-500 recently with better load management… Read more »
Southeasterner
Guest

“What a bunch of absolute idiots at the DOJ”

It sounds like they were under pressure from the various states – TX, AZ, FL, VA, MI, and TN. Had they not challenged the merger you can bet that the DOJ would have heard from elected representatives from those states, which account for a very large chunk of the US population.

The DOJ did what the states wanted them to do which is guarantee they the new airline will maintain services.

Nick Barnard
Member

Last I checked the Lawyers at the DOJ were on salaries, and didn’t get paid by the case. Or perhaps I’m misinformed about this? So how could there be a transfer of wealth from tax payers to the DOJ lawyers? I’d rather have them do something than sit on their bums.

cblock2
Member

A lot of the heavy lifting is done by salaried staff counsel, but in a case like this there’s likely a considerable amount of expert consultancy being paid for, and both the consultants and the staff can run up some good-sized travel bills.

David M
Guest

Running up good-sized travel bills is good for the airline industry. A decent chuck of those bills go to airline tickets.

Salvador Blue
Guest

My eyebrow raising moment was that the slot divestitures “appear” to be limited to benefiting “low cost carriers.” That seems a bit discriminatory. How would LCC be defined in today’s blurred world? And there may be some carriers not considered LCCs, such as Alaska, that would seem to have a legitimate business case.

jr
Member

What Legacy Carrier needs more slots, they are the ones merging with each other, they have been cutting for years. The bidget carreis are the ones that make us forget the overcharging of UAL on may routes.

Peter Mac
Member

I found it laughable that the news media used Southwest as a descriptor for Low Cost Carrier. Obviously, they havent checked fares lately

dan
Guest

what’s the status of the B6-AA codeshare? will AA be able to divest slots then code share on them?

jr
Member

That code share is only in two markets JFK and BOS

DesertGhost
Guest

It’s pretty much what I expected. I do agree that this merger, on balance, is a good move for everyone. Why have two mega legacies and two weak sisters? I fine the situation at Dallas Love to be interesting. An airline which was barely considered in the DOJ complaint sure did reap the most benefits. The conspiracy theorist in me (which I only take half seriously) is pondering this …

noplot
Guest

Actually, jetBlue’s reportedly been interested in flying to Dallas Love for some time (they fly to DFW now and would have to leave it), so Southwest may not be unchallenged for those two gates.

MeanMeosh
Guest

noplot – there isn’t any requirement that an airline must operate out of only DAL or DFW, but not both, at least to my knowledge. Assuming they can get their hands on a gate, B6 could start flying from DAL tomorrow if they wanted to, and not leave DFW. The only restriction at the moment is that nonstop flights out of DAL are restricted to the Wright Amendment perimeter, but that goes away in October 2014.

DesertGhost
Guest

You’ll note again that my conspiracy theorist brain doesn’t take these things seriously most of the time. I’ve read elsewhere that the Love gates are currently leased to Delta. In any event, I have little doubt that American will be able to negotiate the best deal it can for them. It was just interesting that Love was deemed important enough to warrant divestitures, especially since Southwest almost completely monopolizes Love. I simply find the apparent double standard intriguing.

John G
Guest
Now they can get on with the business of merging the airlines. It will be interesting to see what culture comes out. United STILL has two cultures, the old Continental and the old United, and if you fly a lot, you see the difference say if you go through Houston vs. Chicago or Denver. American’s culture is a bit more oriented toward the customer, especially the higher end customers. They have the Main Cabin Extra, power ports, more first class seats, etc. than US Airways does. Their meal service in first is better. We will see how things develop. As… Read more »
David SF eastbay
Member
When I saw the news yesterday I understood DCA/LGA as a way of opening more slots and getting other carriers/routes in those markets. But the other reductions didn’t make to much sense to me. Love Field? Seems a way to build up dominate WN more then reducing AA/US service since neither fly there now. Wow MIA, yeah US was really big in Miami so must be cut back. That laughable. I can also understand the service level agreements, cities/states are just trying to protect themselfs against being dropped completely. Now the game begins of who gets all those DCA/LGA slots… Read more »
Nick Barnard
Member

It wasn’t US that was big in MIA, it is AA.

TC99
Guest

The gates in Concourse J in Miami were already going to be given up as they consolidate both airlines into Concourses D&E that AA already has. Why would they keep gates on the other side of the airport and have to use additional equipment and personnel?

Concourse J is used for the Star Alliance Partners and the One World Partners are supposed to move to E when the renovations are completed.

jay
Guest

I think the reason AA want to give up the ORD gate in the L concourse is that is where B6 and Spirit and others are and that is where they will want their expanded gates.
They most likely have something else up their sleeve for the T2 gates, since Eagle already operated from T2 as well

DAB
Guest

My point of curiosity: did US ever get properly merged with US (meaning America West’s takeover of US)? I thought the pilots were still squawking, but maybe I recall that AA’s pilots will just be able to outvote them… Still, that seems a little dysfunctional if it is still outstanding.

Who this merger is bad for is the United flyer that likes to take cost effective flights (me…). Now I won’t be able to pick up a cheap US flight and concentrate my elite miles whenever they leave star.

NetworkLlama
Guest

I’m in kind of the same spot. I’ve split my time between UA and US based on pricing, but now I’m stuck with UA’s sometimes extraordinarily high pricing. I guess my plan to boost myself to UA Gold this year and try to status match with AA next year will be working out. Probably makes more sense since I largely fly out of DFW anyway due to a recent move.

Pilotaaron1
Guest

Well I’m glad to see that this joke by the doj is now over. Having said that however I do understand the caution on behalf of the affected states to not become a pittsburgh or st Louis given the history of both airlines.

Bill S
Guest

Mostly agree with this analysis, but AA may not be so willing to cut DCA flights to JFK since they provide feed for international traffic to other oneworld carriers — obviously can’t get that over Philly.

Hunter
Guest

Looks like DL is already making noise they want some of the DCA slots. This will be interesting.

jr
Member

Maybe with new slots B6 can get some JFK-DCA convenient flights. Tired of paying $900 on the “shuttles” just so I can get home for dinner

CS
Guest

CMH-LGA has the highest RASM of AA’s service out of LGA… forget Skybus and stop picking on the C-BUS

jaybru
Member
Cranky, I’d like to think your posts, well-supported, well-reasoned, well-stated had something to do with DOJ’s decision. Congratulations! Interesting, the Virginia AG, who was one of the plaintiffs, running for Virginia governor as what could be described as Tea Party-esque, last week lost the election. Now this week, DOJ decides to settle. Who says nothing ever gets done. Can we now say this is the industry as it is going to look for some time? Any more consolidations to come? I would think not, but let’s see what is going to happen. Survival, or blood in the streets? Nice, healthy… Read more »
1js7371
Member

From the beginning, it was obvious this would settle. I predicted it. I maintained it. I explained it. And I defended it. And, despite the naysayers, I was the first on this blog to publicly state that LGA slots were what this deal hinged upon. I believe my words were: “Throw in some LGA slots and you might just have a deal.” Nuff said.

MeanMeosh
Guest
Agree with most of what you’ve written here, except for this about DAL: “That’s right, this divestment would actually hurt competition if that plays out.” I don’t see it that way, even if WN does pick up the gates. WN doesn’t really compete with other airlines out of DAL. They’re really competing with the big boys over at DFW. Part of WN’s sales pitch the past 30 years has been the “convenience” of flying in and out of DAL vs. using a competitor at the bigger airport down the freeway (though the convenience factor has whittled down over time as… Read more »
George
Guest

Quick note-on the bit about maintaining all Hubs for three years-there is a big “Get out of Jail Card”-if the economic situation no longer allows the hub(s) to show a profit, the hub can be closed. Also go read the CNN and Aviation Week takes on the merger-CNN does not like it.

Peter Mac
Member

I just hope they studied the CO/UA merger as to what NOT to do. I wish them luck and good flying

JB
Guest

On a fundamental level I can not embrace another industry consolidation.
I don’t believe either airline is saved by this merger and I know the loss of competition will eventually hurt consumers.
As a miles junkie we are loosing a great FF program with easy to acquire miles and a generous chart.
The return to economic health in the U.S./world is emboldening airlines to cut FF benefits and maximize revenue by selling upgrades, replacing first class seats with economy, dropping unprofitable routs, and shrinking seats to barely tolerable sizes.
How will any of that be checked by fewer airlines?

esw
Member
Brett – Thanks for the usual good work. One small clarification on the Love Field gates: the terms of Five Party Agreement between SWA, AA, DFW Airport, the City of Dallas and the City of Ft. Worth (which are specifically blessed in the text of the Wright Amendment Reform Act of 2006) stipulate that any leased gates a carrier (SWA, AA and CO at the time) might at any time surrender shall not be leased to another carrier, but rather become common use gates. Southwest can schedule on them provided no one else is on them already, but they won’t… Read more »
Ariel
Guest

US does not lease any gates at MIA, in fact no airlines does.

Doug Swalen
Guest

I’m verrrry curious as to what happens at SFO. American shares T2 with VX and has a brand new lounge so it’s not going to move out of there. But is there enough space to take US’ flights in addition to American’s? Certainly some flights will be eliminated in the name of redundancy but will enough be eliminated to prevent American’s combined fleet from spanning two terminals far enough apart to drive passengers bonkers?

astra
Guest

Richard Anderson announced today he has big designs on the two AA gates at DAL.

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[…] Cranky Flier had the best blog on the AA/US Air merger:American and US Airways Give Up Very Little to Gain Merger Approval […]

Jay M.
Guest
I don’t get why you think AA will cut back at LAX. It won’t. It will only keep growing. It’s even building a second Admiral’s Club in the Eagle terminal. All international ops are moving to the TBIT, where AA will have four gates, which will increase gate utilization in T4. Also, the bus operations are moving to a new bus transfer depot being built as part of the TBIT connector, which will possibly allow it to be converted to a jet bridge gate. AA – now LAX’s largest carrier – will only keep growing at the airport. It also… Read more »
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[…] Snyder, who knows the Southern California market better than anyone, wrote this week on his crankyflier.com blog that American probably only will pull back on some of its marginal routes. It’s hard to know exactly what those routes would be, but your mid-level U.S. cities might […]

Steven H
Guest

American Airlines is announcing Los Angeles-Seattle and Los Angeles-Portland shortly. LAX employees were already told about these launches internally. Nothing has changed – AA will continue a huge push in LA post-merger.

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[…] but US/AA made some promises about keeping gates and hubs which really were token concessions. Cranky Flier has an in-depth write up if you’re interested. There is nothing we can really do as consumers […]

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[…] American and US Airways Give Up Very Little to Gain Merger Approval […]

Michael
Guest

Hmmmm – not sure which will have a more positive effect on the merger. Both have become complacent with ther customer service – although I will admit that it has improved of late. Hopefully not too late as they both have the potential to make a great company post merger.

trackback

[…] all the divestitures announced when American and US Airways settled with the Department of Justice (DOJ), the most surprising result is the fight over two measly gates at tiny Dallas/Love Field. Southwest […]

Realist
Guest

Brett was so sure the merger was the answer to all the labor problems. Let the fun begin: http://www.miamiherald.com/2013/11/20/3767544/american-us-airways-flight-attendant.html

Nick Barnard
Member

Eh, I agree with the analysis on airliners.net: http://www.airliners.net/aviation-forums/general_aviation/read.main/5927219/ in Reply 17. This is the current US Airways Flight Attendant union having a hissy fit about losing union dues.

Nick Barnard
Member

e.g. The union is out for themselves, not their employees. Which isn’t the case with the US pilots East/West mess.

Jason
Guest

I fly this roure a few times a year and find the fares pretty “fair”

trackback

[…] and New York/LaGuardia. Slight refresher: As part of the settlement with the Department of Justice, American had to give up slots at both airports for the merger to go through. Now we know American’s plans for those airports. While much focus has been on what’s […]

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[…] American and US Airways settled with the Department of Justice (DOJ) and offered to give up some assets to complete their merger, most people assumed that the slots in […]

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