“Christmas has come early,” proclaimed Laura Glading, the president of the Association of Professional Flight Attendants, whose members fly for American Airlines. But it may be passengers who could end up with the coal in their stockings next year.
The APFA membership ought to be happy, since the merger should end the long-running war between the old American and its unions. That’s because US Airways boss Doug Parker is going to run the show, and he signed a peace treaty with American’s unions even before he had a deal with American itself. The APFA will also get a chunk of the new company’s stock. Happy New Year, too, APFA.
Happier employees will likely translate to better service in the crowded skies but that may be one of the few benefits for passengers in this merger.
American is now the world’s largest airline, a status that might not last long. The basic premise of the big airline mergers of the recent past has been to rationalize networks. Initially, the two carriers will still operate separately, but you can expect that the new American Airlines operations experts are going to assess the network and start reducing or eliminating flights that aren’t profitable (or profitable enough). And once seats are removed from the system—and the industry removed more than 13 million of them over the last year—prices will likely rise.
The scramble is on for airports such as Charlotte and Phoenix to try to hold on to as many of their current flights as possible. Phoenix, the soon-to-be former headquarters of US Airways is up against Dallas and Los Angeles, while Charlotte, another US Air fortress, may lose ground to American’s Miami stronghold as a southbound gateway. As part of the deal with the Department of Justice, American has already surrendered 52 slot pairs at Reagan National at Washington D.C., and 17 slot pairs at New York City’s LaGuardia field, as well as two gates in each of Boston Logan, Chicago O’Hare, Dallas Love Field, Los Angeles and Miami. The deal affects just 112 of American’s 6,700 daily flights, so there’s still a lot of room to rationalize.
As part of the deal, US Airways will leave the Star Alliance network on March 30 and join American’s oneworld network. That means members of the US Airways’ Dividend Miles program will eventually lose access to rewards on carriers such as United and Lufthansa, but they gain access to American’s smaller oneworld network, which includes the likes of British Air and Qatar Airways. It will also add US Airway’s elite level flyers to the old American’s elite flyer pool, meaning that the competition for upgrades just got a little more intense.
Fewer flights, higher fares, more competition for frequent flyer rewards. Is there anything to like here? Yes, says Blair Pomeroy, an aviation consultant with Oliver Wyman. “I do know what’s good for the passengers: a profitable industry. People don’t want an industry that’s barely alive.” As is the case in technology, for instance, profitable firms tend to be more innovative. And new jets, after all, have to be paid for by somebody. “The airlines are not making extraordinary profits,” he points out. At least not today.