Mikeonbehind the curtain

As American's CEO, with which airline would you merge?

american-nose  It's being reported that American Airlines is now evaluating potential mergers with US Airways Group Inc., JetBlue Airways Corp, Alaska Air Group, Republic Airways' Frontier Airlines, and Virgin America. If you were CEO of American which merger would you proceed with? Or not merge at all?

 

US Airways

US Airways, if you read the press, is the most talked about option. After reaching a deal with three of American's big unions (Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union) in April on merged contracts negotiations, US Airways has made it known that it would like to merge. The big losers in this merger are the employees of the combined HP/US. And the upside of this merger? Well 1) American would be bigger and 2)... well there is no 2.

Alaska Airlines

A merger with Alaska has long been rumored, not only for American, but Delta and others. Alaska's heavy northwest route structure has always been complimentary to American's east / south coast structure. However, Alaska Airlines is like Switzerland, having partnerships, codeshares and (I can only assume) lots of passengers from many of American's competitors. The passenger loads could be dramatically changed in a merger. 

In addition, American has a terrible track record in west coast mergers - quickly closing routes and hubs. (Reno Air, Air Cal, and how I miss the SJC Admirals Club) 

JetBlue

American and JetBlue have started codesharing on short regional flights that American doesn't serve from JFK such as: Portland, Maine; Rochester, N.Y.; or Richmond, Va. However, as the two heavyweights at JFK and with JetBlue soon breaking ground on an expansion of their terminal, a merger seems unlikely.

Republic/Frontier

I'm not even sure what to say on this one. American needs to grow its international routes the same way Delta has over the past few years. I don't see how Frontier's heavy domestic presence provides any synergies with American's routes to allow that type of expansion. In fact their Denver hub is way to close to DFW to make any sense.

republic-frontier-route-map

Virgin America

And last, but not least VX. While a possibility, I think this suffers from the same lack of benefit as Republic. Additionally I think the global Virgin brand would not consider a merger as their long term goals are quite different.

virgin-america-route-map

What do you think? One of the above? Or none at all? Don't forget, as virtual CEO for the day, the "none at all" option comes with a giant payday that you might want to include in your decision. 

Mr. Horton and his management team stand to receive somewhere between $300 million and $600 million if he can make it through bankruptcy court without merging first with a rival like US Airways.

Weigh in on your decision below or on twitter!

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Comments

#1
FriendlySkies July 11, 2012 at 02:42 pm

Personally, I think AS would be the best bet. They've got a strong west coast network, and obviously fly to a lot of places in Alaska that AA doesn't go to. Additionally, AA & AS have an agreement so AA elites on AS flights get exit rows, free bags, priority boarding, etc.

Republic/F9 would be a disaster. Given the amount of money they've lost, and their reliance on kettles vs. business people, seems counter productive.

US - hell no.

#2
BR July 11, 2012 at 03:35 pm

I personally hope they don't merge, and I don't know if they'd be able to even get approval considering all the consolidation going on in the airline industry.

#3
Rocky July 11, 2012 at 04:43 pm

AS - Always a rumor for a merger but the former Bill Ayer was 100% on the Stand alone model. Up until the 2 for one stock split earlier this year Alaska stock was up between 60-70/a stock, WAY out of reach of ANY merger. Also an AS merger would be great for feeder traffic for any airline. AS feeder traffic has allowed Delta to add a number of international routes out of Seattle and allowed Delta to maintain their AMS and NRT out of PDX despite the economic downturn. AS dominates the West coast and travel between states like Washington, Oregon, and California. However Alaska doesn't have the international routes that AA needs. Furthermore, I don't think AA could manage the business AS does in and out of Alaska and intrastate. In fact, most airlines have ceeded Alaska routes to AS due to how unique and hard they are! AS would provide AA with Great west coast feeder traffic, but I don't think AA can manage AS the way Bill has. However again with the cheaper stock prices and Bill gone, this is an option!

US Airways: Great for more traffic to Europe. THey can move slots around and move traffic from PHL to EUrope to the larger JFK and compete better with DL and UAL. However, US does not have any route structure to and from Asia, this is where AA is already lacking and only slightly picks up gains from it's JV with JAL. However, it has nothing like DL and UAL has, with intra asia flights and hubs in NRT.

VX: Virgin will never allow this! Ya right

UAL: too many complications from the CO/UA mergers. not to mention to big to be allowed by the Gov.

DL: Again to big to be allowed by the Gov. However AA Latin america presence would be a nice compliment to DL route structure. However Chicago hub is WAY to close to MSP/DTW/CVG

Frontier: Yeah! AA goes head to head with UA in DEN. ummmm No!

Jetblue: Good for feeder traffic, but instead boost code shares. Don't merge. To much overlap in Caribbean and Latin America. Doesn't really work

I'd go with Stand alone. However if AA is going to stand alone and be successful they need to add DAILY flights to their European destinations. Business travelers are not going to fly AA when they can only fly a route 3x a week!

#4
Mike July 11, 2012 at 04:56 pm

@FriendlySkies lol on US!

@BR I think there is precedence for them to merge regardless of what is going on. The airlines lose so much money anyway, regulators don't know what to do.

@Rocky good point on the AS stock, I originally had that in my post, but I accidentally closed my browser tab and lost what I wrote. Can you ask the guy at UPGRD to make some sort of auto save feature???!

#5
A-City August 8, 2012 at 12:17 am

American owes too much money and isn't going to be able to last long as a independent carrier. U.S. Airways makes the most sense to be the candidate. Alaska and Jetblue want to remain solo. Frontier and Virgin America do not even have much to offer for American. U.S. Airways already did an agreement for the 3 unions with American and that's already the first step, but doesn't mean that its a merge, but at least to get an idea that they can be the leading candidate to be the merging partner with AA. American's name is much more bigger and a merger between US and AA can take on Delta/Northwest and United/Continental

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