What about American?

 

With the recent completion of the merger of Continental and United, American is left a distant third in the Airline race.   Some of the reasons to be concerned about American are:

First, American was just recently awarded antitrust immunity for transatlantic flights, meanwhile United, Continental and Delta have been enjoying the benefits of their ATIs for quite some time. 

Second, While United, Continental and Delta have been growing their operations and route network, American has been scaling back.   Some examples of route issues that American has suffered:

  • American canceled their Moscow service after just four months of operating
  • American continued to delay their Beijing route until finally launching it a few months ago
  • American recently announced a second scale-down of their San Juan hub.  Once a huge presence, American is slowly dwindling away making it nothing more than a destination.
  • In comparison to Delta and United, American's route network is very weak in Asia and Europe. 

Third, American was attacked by Delta large scale earlier this year when Delta launched their Double MQM promo for Nashville, Pittsburgh, Raleigh/Durham and St. Louis.  With the exception of Pittsburgh, the other three have been American focus cities for quite some time with a substantial membership base.  

So the question becomes, how is American going to survive?   Is American the 'ugly girl' left at the dance?  Will American try to merge with US Airways who is the only other US major airline stand lefting in the corner?

 

Comments

Yes--I predict US and AA will merge.

#2
Mike October 18, 2010 at 02:21 pm

I highly doubt American will merge with US Airways. I'd bet they merge with JetBlue before US Air.

American will be fine, for some reason everyone forgets that AA merged with TWA and was the biggest airline for most of the past decade. Now with DL and UA merging, the tables have turned, but I would argue less dramatically than you think.

Being a big U.S.A. carrier is not as important as being a big global carrier. And by that I am talking about alliances and international ownership/mergers. Over the next 20 years we will see more consolidation similar to Europe (Lufthansa buying BMI, Austrian, etc. and British Airways buying Iberia and its new "list of 12")

I think you will see a gradual easing of foreign ownership of airlines in the U.S. and four global airlines (along with a handful of LCC's) will be the new status quo.

This post really should have been about US Air. They really are in an unfortunate position of being neither a LCC nor a full service airline. There really is no place for them to go except to split into an LCC, drop "first class", and sell off their best assets.

#3
Gene October 18, 2010 at 05:49 pm

I can't imagine that AA would merge with US before US resolves its labor issues from the HP merger. If US could resolve those issues, an AA/US merger might make sense.

Would a Frontier/Republic merger with US Airways make sense?

#4
Mike October 18, 2010 at 05:51 pm

@Gene I certainly think a Frontier merger makes more sense than AA. The last thing American wants is basically two separate airlines (which is basically what HP/US still is).

If US Airways splits back up into American West and US East, then it might make sense for American West to merge with someone like Frontier and the US East assets to be sold to AA.

#5
mowogo October 18, 2010 at 07:56 pm

US can't be sold as an intact airline. What I could see happening if US takes some losses is that the Airline enters bankrupcy, and AA acquires certain assets (mainly the Airbus aircraft and the CLT hub). Yes it would add some fleet complexity, but it would also allow for accelerated fleet retirements, and CLT adds a logical east coast connecting hub. One reason I never considered AA was when I lived in GSO, and having to connect in either MIA or DFW (and there are a lot of similar small stations in the southeast)

#6
Fozz M October 19, 2010 at 09:54 am

I generally agree that US is not a viable option for AA to acquire, but I'm not sure it will stop Doug from trying to acquire AA. Not to say that it's possible, but I wouldn't be surprised.

The reality is that two of three US's prime bases are major Southwest markets, if Southwest or another low cost carrier enters CLT, US is likely dead. CLT is the last bastion that keeps US alive due to the high yields. This is likely the same reason US can't afford to break off CLT and sell it.

#7
mowogo October 19, 2010 at 10:09 am

Southwest enters CLT when the Airtran merger closes. However, I don't see WN entering CLT as something that will have a major impact on US, since most of the local business comes from banks and Nascar, which need the flights that US offers, and are not willing to connect.