American Airlines-US Airways Merger: What Frequent Travelers Need to Know
Deal to Close in December, January 7 to Be “Big Day”
When American Airlines and US Airways announced their planned merger in February of this year, it was expected that the deal would close in the third quarter. Few people if any envisioned that the Department of Justice would file suit six months after the announcement, seeking to block the combination on antitrust grounds.
The two airlines and the Department of Justice reached a settlement in that case on Tuesday and the merger will proceed with an eye towards closing the deal in December 2013, at which time American will simultaneously emerge from bankruptcy protection.
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. Management of the new American Airlines should pay careful attention to the lessons learnt in these recent mergers: while the Delta-Northwest merger in 2008 went off with nary a hitch, the United-Continental deal, which closed in 2010, is a work in progress and its missteps continue to make headlines.
A year from now, the combined airline will look back at the various speed bumps, including the acrimonious negotiations followed by the Justice lawsuit, and view those as the easy part. History is telling. United’s CEO, Jeff Smisek, who knows a thing or two about mergers, called 2012, the airline’s third year post merger, “the toughest year of our merger integration” and went on to say that “We are absolutely not satisfied with the financial results we produced.”
Now that the dust and lawsuits have settled, a clearer picture of the combined airline is emerging.
A few things are unquestionable. 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 will produce 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.
TARGET DATE: JANUARY 7, 2014
The next major milestone for the two airlines is a court hearing on November 25, at which the airlines expect to gain approval for the settlement. American already has approval for its reorganization plan from the bankruptcy court.
The deal, if all goes according to plan, will close in the beginning of December.
January 7, 2014, however, will be “a big day for us,” Scott Kirby, who will serve as COO of the combined airline, told Frequent Business Traveler. “We will become a single airline or at least take the first step of becoming a single airline” on that day, and offer reciprocal frequent flyer benefits.
Kirby also told Frequent Business Traveler that there was a “silver lining” to the delay that will result in a “more seamless customer interface” on January 7.
Following that date, the two airlines will continue the normal integration process and move towards obtaining a single operating certificate. The combined airline will be well prepared for integration because “our labor deals are largely done.” Kirby promises that “the process will be smoother than what you’ve seen in other mergers.”