Reader Mail : Should American Airlines & US Airways Merge Next?

This week’s reader mail comes from Jaime, from Elk Grove, IL. Following the announcement this week that United Airlines and Continental Airlines will merge, Jamie asks “The United States will now be home to the two largest airlines in the world once United and Continental merge, should American Airlines and US Airways merge next?”

Well Jamie … it is likely that the topic of an American Airlines and US Airways merger will come to the forefront of conversations among the industry, but it is important to point out two things about the United Airlines – Continental Airlines merger.

1) The US Department of Justice must approve the merger for it to move forward.

2) Continental Airlines’ shareholders are suing the boards of both United and Continental to block the merger due to unfavorable share values being equated in the stock swap between the airlines.

… but now onto your question…should American Airlines and US Airways merge?  Although a merger between the two airlines would create the third largest airline in the world, the two airlines have very little to offer each other in terms of increased global reach.

Prior to the Delta Air Lines and Northwest Airlines merger both airiness had a substantial reach in Europe. Delta brought stronger Africa, India and South America coverage to the combined airline, while Northwest Airlines was the dominant US airline in Asia maintaining a hub in Tokyo and Fifth Freedom access from Japan into Asia.  Delta Airlines and Northwest Airlines were also long time alliance partners, both aligned with Air France-KLM.  The merger of Delta Airlines and Northwest Airlines was not hard to envision.

With the proposed United Airlines and Continental Airlines merger, both airlines are strong in Europe, and while United Airlines has a larger presence in ‘Mainland Asia” and has access to Fifth Freedom onward Asian routes from Japan, Continental Airlines is a dominant airline in the Pacific, with a long time hub in Guam.  Continental Airlines’ operation of Continental Micronesia, aka:  Air Micronesia & Air Mike, links significant portions of the Pacific from its Guam Hub, as well Continental is strong in Central America.  Laying the route maps of United Airlines and Continental Airlines over each other shows a substantial global presence.

Both Delta Air Lines and the ‘new’ United Airlines offer passengers travel options to six continents on routes operated by their aircraft

Look at the route maps of American Airlines and US Airways, a merger of these two airlines would offer passengers options for only four continents, as well as access to only two cities in Asia, access to a single Middle Eastern destination with US Airways flying to Tel Aviv, and a single access to point to India with American Airlines’ Chicago-Delhi service.

Both American Airlines and US Airways have complimentary service to Europe, however American Airlines is the dominant U.S. airline servicing Central America and South America.

Route limitations aside, US Airways and American Airlines are in competing alliances. American Airlines would not leave OneWorld and the financial penalties for US Airways to leave Star Alliance are significant.

US Airways still isn’t done dealing with issues related to its previous merger with America West and the corporate culture clash between those two companies. An attempt to merge US Airways into American Airlines (and American Airlines would have to be the surviving brand) would be a disaster.  The difference in corporate culture between the US Airways and American Airlines is substantial and rather than bolster the airline could potentially be the death knell of the airline.

Looking at the big picture, US Airways does not offer any substantial benefit to American Airlines other than making the airline larger. American Airlines can expand in a more controlled manner without a merger with US Airways.

So will we see American Airlines and US Airways discussing a merger? Its likely, I rule nothing out in the airline industry, however I do not foresee this merger in the future giving the high risk and low benefit to either company.

Happy Flying!