Mikeonbehind the curtain

Rumor: US Airways to Split

US Airways and America West merged in late 2005. It was just on the heels of America West coming out of a four year bankruptcy and US Airways, at the time, was in the midst of bankruptcy proceedings. It sounded like a match made in heaven – two bankrupt airlines merging to make one big bankrupt airline.

All joking aside, it's been over five years now and the flight attendants from the two pre-merger airlines still work under separate contracts. In fact, the National Mediation Board has only this month started contract negotiations for the two parties, the first time since the merger.

The pilots are in a similar situation still struggling to determine merged seniority in the combined airline. This issue, combined with pre-9/11 wages, leads to the possibility of a work disruption as the pilots fight back.

We've spoken in the past on the Upgrd Podcast that in our opinion it might not be a bad idea for US Airways to split into two. The America West (“West”) planes, crews, and pricing model never did mesh well with US Airways (“East”) full service model. It's difficult to understand how they can “have their cake and eat it too” by offering low fares and yet first class. Obviously this manifests itself in a poor soft product where first class is reduced to simply a bigger seat on many domestic flights. You certainly don't see the meal offerings on US Airways that you would see on American or United.

I mention all of this due to one of the latest rumors (or at least the one I heard) that US Airways “East” may be sold to Warren Buffet's Berkshire Hathaway investment group, while “West” might be sold and operated by Frontier (owned by Republic).

This is probably a left over April fool's joke, but I think it actually makes sense. I don't believe US can be a low cost and low fare carrier while maintaining their full service legacy status. Especially in light of Southwest's move into some of their strongholds like Laguardia and Charlotte. The two groups have not been able to merge contracts in this amount of time, which makes it doubtful that it will happen in the near future. By splitting up, the two airlines are able to work to their strengths and perhaps will allow some consolidation in the industry.

This content is not provided or commissioned by the company whose products are featured on this site. Any opinions, reviews, analyses, or evaluations provided here are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by the Advertiser. This site may be compensated through the Advertiser's affiliate programs.

Comments

#1
kd5mdk April 3, 2011 at 10:10 pm

You know, this makes some sense. That would give Frontier a much stronger West Coast presence and perhaps the size necessary to survive as a viable regional airline. On the other hand, would US Airways East + AMR make any sense? It would offer AA a Southeast presence to compete with Delta that Miami isn't great for, boost their Northeast coverage at LGA and DCA, and get me flights to PWM (hopefully). :)

#2
Mike April 3, 2011 at 10:22 pm

get me flights to PWM (hopefully). :)

The real reason for your analysis comes through. ;)

I doubt AA would want to merge with US due to the same issues the US/HP merger has with contracts and staffing. However, if East's assets were up for sale I'd speculate that AA would be first in line to snatch up their gates and routes.

#3
Christopher Ramos April 3, 2011 at 10:59 pm

As a previos Flight Attendant, and supervisor it doesn't surprise me that the two unions haven't merged to date. You can't bring two models on the extreme opposite ends and expect to end up with "life matter". It's evident that the former USAirways choose the WRONG partner to bed with.

In order to truly make a STRONG differerence in today's market USAirways has to find a viable option for the company, and it's GREAT employees, of which I was a part of not too long ago. If they can't achieve this very important business model, they will have to sell, split, and or divide again in order to end up ALIVE going forward. Something MUST give, we are beyond "has to give". The employee groups already have done so multiple times.

"A wise employer is one that takes care of it employees, it will only produce a high return"- My life professional quote!

#4
kd5mdk April 4, 2011 at 01:36 am

You got me.

Actually, one option would be for AMR to purchase US Airways East and operate them as a separate company, like they do with American Eagle. They can coordinate routes, capacity and prices, but keep seniority, pay etc completely separate. Now, this hasn't worked out for US because they were trying to integrate the companies, but perhaps that's not required. Or maybe a better comparison would be BA and Iberia after the merger. Mostly separate, but presumably coordinating.

@kd5mdk: I think you're spot on at the attractiveness of US Airways "East" as a potential merge carrier for AA.

#6
Sunlight April 4, 2011 at 12:57 pm

I thought AMR was on the brink of CH11? How could they afford to purchase US East? It definitely make AA stronger in the southeast, and they could do in CLT what they have previously tried in RDU. Also, it would give AA options for their aging MD80 fleet.

#7
kd5mdk April 4, 2011 at 04:23 pm

It sounded like a match made in heaven – two bankrupt airlines merging to make one big bankrupt airline.

Never stopped anyone before.

#8
Mark April 5, 2011 at 03:09 pm

Berkshire Hathaway is certainly not going to buy an airline. Limited competition rail freight is one thing, airlines, another.

#9
k P April 6, 2011 at 03:08 pm

Funny you should bring this all up. Something is working with US Airways. They are number 1, 2, or 3 in all major carriers statistics such as lost/mis-handled bags, customer complaints and on-time performance. Only one of the two merged airlines was in bankruptcy when the merge occurred and that changed rapidly. For last year US Airways earned an overall profit of over $460 million. Not bad for an internally troubled airline. Seems like a bunch of potential investors might want to take a look at them.

#10
Fozz April 6, 2011 at 03:18 pm

If one takes a closer look at US, you'll realize that the bulk, if not all, of their profit is coming from baggage fees. During the Star Mega Do presentation that Doug did, he mentioned all of their profits are from luggage. That said, perhaps US would be better to give up on the passengers and just move cargo.

#11
dpsk April 6, 2011 at 03:55 pm

k p, the something right that is working is their PR department. Each month the DOT publishes the rankings of On Time, Mishandled bags and Customer Complaints. US's PR dept. then publishes their own list and states the ranking of US using only what they consider a large hub and spoke carrier. They exclude a carrier that is larger than them, carries more Customers than them and has more planes than them and that carrier is Southwest. You are correct that only one carrier was in BK, but you omit that the other company was on the verge of entering BK again. The CEO of HP, Doug Parker convinced Wall Street to finance him, again and had a shot gun marriage. The stock sold at 20.00 per share is now at 8.00 per share. It is deep in debt, slashes jobs to stay open and has no employee moral.

#12
Dave April 13, 2011 at 08:08 am

Take USAirways and Merge with Hawaiian Airlines....

That would be a great merger

#13
zenough April 19, 2011 at 04:00 pm

What can one say when they read an article like this…..???? The lights are on, but nobody is home…? I worked for AWA and was lucky enough to be able to jump ship before the merger LOL….more like the acquisition (AWA taking USA) took place (WSJ’s words not mine). Since that time the unions on both sides have acted in the most unethical ways possible. First ALPA was voted off the property in an unfair vote, AWA around 1600 pilots and USA around 3600 pilots, I don’t see the fairness there do you? Then USAPA the thug union was brought about and has done everything to destroy the futures of the AWA pilots. All this happening while D Parker and his side kick have received massive bonuses….USAPA was allegedly offered a pay deal for the pilots….. Delta plus 1%....which they rolled their eyes at and walked away. If I didn’t know any better I would say USAPA has made a deal with the company….for as long as they keep procrastinating the boys at the top are laughing all the way to the bank……or the casino. Here is what I feel should happen….the two guys at the top should be fired….USAPA and ALL its leaders (INCLUDING THE LAWYERS) should be investigated and a forensic audit should be performed on any and all books kept by that union, this also includes audits of said union officers & lawyers. Then the ex CEO of CAL or Bob Crandall should be brought on board to straighten out the company and its board of directors. Then and only then should there be a decision made about the future of this holy merger muck up. Let USA floats or sink (for I don’t know anyone who really wants the rag tag group of trouble makers) and sell AWA to UAL/CAL. Sorry if this sounds rather mean but it is the truth.

#14
cactus June 3, 2011 at 02:03 pm

We need to get some facts straight...America West filed bankrupcy in 1991 and had been out of bankrupcy since 1995. America West has always been a low cost full service carrier...originally without F/C until acquiring the B757 when dual class service was initiated. America West before 9/11 had a exclusive signature service that was second to none...in addition when awa operated its 747 bird of paradise service to honolulu and nagoya japan it was rated the best service to the islands as it was treated as an international service....the reason east and west hasnt and wont mesh is because the entirely different cultures and attitudes at both airlines..and to further set the record straight AWA was a profitable airline and USAir was not only in bankrupcy but was up for liquidation at the time AWA acquired USair...please check with the SEC filings for verification. AWA had been a major carrier since 1989 not a regional as the east likes to believe....I guess in that retrospect we could believe the east was just a northeast regional commuter as well....AWA management or AFA was never truthful in the facts of the time of the acquisition and that has just continued to fuel attitude and incorrect beliefs.... unfortunately for the employees of AWA they have not received the support of either.

#15
Grover Cooper August 7, 2011 at 09:57 pm

Split the Damn airline....let Legacy US Airways go back to being the first class carrier they were and let AWA go back to chewing on their wanna be airline......status--> (Creepy Cactus')

Leave a Comment

Your email address will not be published.

e.g. http://www.example.com/