- Daily Zen
With a potential merger between US Airways and American Airlines already in place, the airline industry is experiencing yet another shakeup. If the merger is approved by the unions and the federal government, it would in effect create the largest airlines in the United States. There still lie a few challenges ahead for those who want to see the merger go through. First of all, American Airlines recently filed for bankruptcy, a process that can take years. In order for the proposed airline merger to be approved, the bankruptcy court first has to rule that American Airlines has the right to merge while in bankruptcy. Next, unions for both of the airlines will have to vote to approve the merger. Finally, the United States Transportation Department will have to conduct their own research and hand down the final approval for the merger.
Union Support for a US Airways-American Airlines Merger
American Airlines has three major unions which most employees belong to. On May 4th, 2012, the three unions jointly sent a letter to the board of directors of American Airlines expressing support for the merger as a viable solution to bring American Airlines out of bankruptcy as well as to provide customers with the best flying experience. Currently, the leadership of American Airlines is fighting with the unions to impose their own work rules and payments, as well as to terminate any current contracts, in order to consolidate the company and keep them from going under. The Unions, who have 60,000 employees from just American Airlines, see the merger as a way for the ownership to end the bankruptcy fight, and for the workers to get a fair contract.
Customer Benefits of a US Airways-American Airlines Merger
Analysts are trying to determine the full effects that a merger will have on air travel. While many people in the industry say it’s the best course for both businesses as well as the employees, the benefit of travelers has yet to be determined. A frequent airline reporter, Seth Miller, made his opinions clear on the merger: “There’s not a single positive aspect of the merger for consumers” he stated. The reasoning is that with less airlines and less competition in the market, fares have no way to go but up. With a near monopolization of the industry that the country’s largest airline would create, the newly merged company will have the ability to impose any price they wish on customers, and with one of the largest airlines in the world no longer competition, customer satisfaction is going to have a dramatic decrease.
Historical Effects of Airline Mergers
As with every merger, competition in the industry is going to suffer, and there will always be critics. Unlike most other industries, airliners have gone through major mergers in the past, and the results have been thought-provoking. It is true, that recent mergers, such as the United Airlines one in 2010, caused slightly higher prices for consumers. However, that rise in costs can in no way be attributed to the merger. With previous mergers over the last 15 years, no pattern has been set in fare prices, leading us to believe that a rise or decrease in costs after a merger is not a result of a decrease in competition.
The problem lies with American Airlines more than the merger itself. American Airlines has attempted to purchase or merge with many companies in the past, such as AirCal and others. AA has not had a good business platform throughout its existence, and it’s largely due to the fact that with the previous mergers, their only objective was to get rid of the competition, not to increase the quality or availability of air travel. On the contrary, this isn’t American Airlines looking to merge with a smaller company; it is US Airways, the 5th largest airline in the country, trying to increase their own exposure, while saving employees and customers the hassle of the bankruptcy battle that American Airlines is currently going through.
Possible Outcomes of a US Airways-American Airlines Merger
If American Airlines does in fact approve the merger, and any injunctions against it are lifted, the results will be mixed. First, the current financial troubles of American Airlines will no longer exist. If the merger does not go through and AA has to go through bankruptcy court in order to keep functioning, they will have no choice but to lay off thousands of employees. This tremendous toll on airline workers can be quashed if the merger goes through the way US Airways expects it to. On the other hand, both American Airlines and US Airways have the worst customer service ratings by customers out of every major United States airline. Mergers always cause headaches in the support world, as one airline has a different culture and procedures than another. It’s been estimated that if this merger does in fact become reality, the new airline will probably have the worst customer service feedback for any airliner in the USA.
When can a Merger be Expected?
There are currently three major hurdles that need to be overcome in order for the two airlines to successfully merge. First, Bank of America is going to have to approve a merger plan. At this point, US Airways is the only party who is publicly interested in the merger; so many details still need to be worked out. Second, the Justice Department needs to rule that Bank of America does not have the authority to drop current contracts with the Union, as well as drop any possible injunctions due to the merger. Finally, the Department of Transportation is going to have to do a short research study on the effects that the merger will have. Once this study is complete, they will give their recommendation as to whether it should proceed. Once these three steps are successfully completed, both boards of the company will sign the final merger agreement, when at that point, US Airways and American Airlines will be one company.