What the American-US Airways Merger Means For Frequent Flyers
Many mega-mergers are announced but never come to fruition, the most recent example being AT&T and T-Mobile, and there was admittedly a lot of skepticism when American Airlines and US Airways announced last February their plans to combine. Along with that news came a fairly aggressive timetable for the merger: it is set to close in the third quarter, the start of which is only two months away. American plans to emerge from bankruptcy protection simultaneously with the closing of the deal.
The combined entity, which will operate as American Airlines, will be the world’s largest airline in terms of passenger traffic, eclipsing United Airlines and Delta Air Lines, the current and former holders of that title.
Both United and Delta attained those titles through merging, the former with Continental Airlines, the latter with Northwest Airlines. While the Delta-Northwest merger in 2008 went off with nary a hitch, the United-Continental marriage in 2010 was headline fodder.
Indeed, when the management of the combined American Airlines looks back six months after the merger, they will view the acrimonious headline-making negotiations as the easy part. United’s CEO, Jeff Smisek, at the start of 2013, called 2012 “the toughest year of our merger integration” and went on to say that “We are absolutely not satisfied with the financial results we produced last year.”
Since the announcement of the merger in February, American and US Airways employees have been focusing on what the new American Airlines will look like post merger.
A few things are clear. The new American Airlines will be based in Fort Worth where American is currently headquartered. It will have 94,000 employees, 950 planes, 6,500 daily flights, eight major hubs, and yearly revenue of roughly $39 billion. It will be the leader in several markets including the East Coast, the Southwest, and South America, although it will continue to be overshadowed by Delta and United in Europe and Asia.
It will remain loyal to the oneworld alliance, which American co-founded, and US Airways will leave Star Alliance by the beginning of 2014 to become a full member of oneworld.
That’s the easy part.
The hard stuff ahead will have to focus on the passenger experience before, during, and after a flight. Just as the announcer would say on a reality show, any misstep could be fatal.
Right now, even though the merger won’t close for several months, employees of both airlines are working on aligning thousands of procedures, creating new integrated manuals, and selecting and merging IT systems. In their spare time, they need to take American’s parent company AMR out of bankruptcy, pass regulatory muster at the Department of Justice, and align tens of thousands of unionized employees with new labor contracts.
INTEGRATION NERVE CENTER
Ten days after the merger, American announced a merger transition team and created an Integration Management Office as the “primary nerve center,” led by Bev Goulet, American’s chief restructuring officer, and Scott Kirby, US Airways’ president, for the tasks required to integrate the two airlines.
The IMO is charged with “capturing the value of the merger” (i.e. cost savings and increases in revenue), “developing the master plan and timeline” for integration, and working with human resource management departments at both airlines “to implement the design of the new organization.”
Also announced were the appointments of the airline’s top executives, including Tom Horton, currently AA’s CEO, as non-executive chairman (a post he will vacate in 2014) and Doug Parker, US Airways’ CEO, as CEO.