Excerpt from the Boyd report about the USAir and AA merger.
Q: Will this bankruptcy accelerate a merger with US Airways?
A: There is the misconception that AA must merge with somebody, simply because other airlines have done so. In many corners of Wall Street, that is the only reason and the total depth of the analysis regarding an AA merger. The fact is that US Airways would not bring much to the table – in fact, it has very little synergies with American.
Some have suggested that US Airways could be the domestic operation for AA, while the international would be operated by AA mainline. By all means, do not take anything seriously from such analysts. They obviously have no understanding whatsoever of the issues of fleets, unions, hub operations, maintenance programs, etc.
Sheer size is not a true metric for airline health. But it seems that the AMR bankruptcy has created a whole garden industry of self-anointed airline industry experts. One quote from a Bloomberg article was particularly telling. Lamenting the fact that American is no longer the largest airline in the US, the writer confidently told readers: “
This factoid, which the “analyst” dug up, is meaningless. It is also incredibly ignorant of the airline industry. What is missed is that American today faces essentially the same competitive levels from Delta as it did when it faced a separate Delta and a separate Northwest. What this veneer expert doesn’t recognize is that NW and DL before the merger were code-sharing and had interchangeable frequent flyer programs.
US Airways, a fine operator, does not offer much to the AA system. The Phoenix hub is not particularly additive to AA, the PHL hub is competitive with the AA JFK operation, and CLT would mainly offer access to more small markets – which are difficult to serve economically. AA already as access to traffic at most mid-size and larger markets in the Deep South. As for feed – much of the international markets at CLT would compete with AA service at ORD, JFK, and MIA. The argument that CLT “would give AA access to the South” sounds appealing, but is largely bogus.
There are no guarantees, however, that a shotgun marriage could not be arranged for the two carriers. Enormous amounts of money can be made in such deals, whether they make sense or not for the airline entities involved. If such a transaction were arranged, it would entail enormous amounts of additional “moving parts” and challenges for the
combined entity to resolve issues such as labor contracts, re-structuring of entire
revenue flows, and rationalizing fleets. There would be no near-term benefits.
