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American Airlines Hints at Potential Merger with US Airways

After weeks of repeated denials that it was even considering a merger with US Airways, American Airlines has agreed to "study" the prospects of a marriage between America's third and fifth largest air carrier by traffic.

American Airlines says it is agreeing with creditors to consider potential mergers while it is still under bankruptcy protection.

American parent AMR Corp. says that the company and its bankruptcy creditors agreed to develop "potential consolidation scenarios," but that didn't mean it would pursue a deal with any particular party.

Still, Friday's announcement suggested that events could be moving faster than AMR had expected since US Airways turned up the pressure for merger talks.

Live and Let's Fly probably got ahead of itself in hinting that AA/US merger talks were already in advanced stages, but a source continues to tell me that off-the-record talks between management are ongoing. I still predict, as bad as it will be for the consumer, that we will eventually see a merger, completing the reduction of the big-six to the big-three (and Southwest).

Unlike past mergers--consolidation in this case is being pushed by labor. This is US Airways' dream scenario, though Fozz is right that the AA folks are just fooling themselves if they think a merger will improve matters, let alone magically solve everything.

On Friday hundreds of pilots and other employees marched into AMR headquarters in Fort Worth, Texas, and in New York to deliver a message of "no confidence" in AMR management. The unions believe that a combined company would cut fewer jobs and stand a better chance at competing with industry leaders United and Delta.

US Airways said, "A combination would be best for both companies' employees and customers, as well as for AMR creditors and US Airways investors." That's code for, "The merged airline will seek higher profits through a more meager route map, higher fares, and the reduction of 'redundant' labor."

One thing that is performing exceptionally well is US Airways stock--which has more than doubled this year. I wish I had bought some of that instead of pre-bankruptcy AMR...

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Comments

#1
Jim May 13, 2012 at 06:58 pm

The AA unions made a 'deal' with Parker when Parker had nothing at stake. It was just another way to show up the existing AA management. If AA would replace the top level of management with 8 names chosen at random from the Ft. Worth phone book, the unions would make a deal and the bankruptcy would be over.

#2
Travis May 14, 2012 at 07:16 pm

Save Asia and the Middle East, the 2-decades long creep towards consolidation in Europe and North America continues. Years ago the long roster of failed airlines was due to mismanagement and good old competition, now it's purely cost driven. If AA/USAirways merge then Alaska Airlines might have to merge. Of consequence, at the Tier 2 level, there's only JetBlue, AirTran, and Southwest left. Eventually we'll see one continent, one airline. As the number of airlines shrinks the demise of frequent flyer programs comes nearer. The new ad slogan by 2030 will be "Global Airways gives you choice: Fly, drive, walk, rail or sail." What's driving the consolidation regardless is the end of cheap fuel. The post-WWII explosion in air travel was based on it. It's all economics in the end. So enjoy it all while you can.

#3
Nick May 15, 2012 at 12:57 am

@Travis: Nationalism will prevent it from going to only one airline per continent. Also, such a level of consolidation leaves too much room for a niche player to join with lower labor costs, and last until they rise to the level of the legacy carrier.

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