"US Airways executives were tight-lipped about the airline's ongoing evaluation of a potential bid for bankrupt American, but suggested no decision is imminent." That's the lead from a story in USA Today. Note the "tight-lipped," "potential bid," and "no decision" parts. In effect, US Airways executives answered questions but didn't say anything they hadn't said before. They simply confirmed that the long-rumored acquisition move between US Airways and American remains on hold. Here are some key holding pattern points:
- American, in bankruptcy, is in a weak and vulnerable condition, but still has a formidable market position, fleet, and—especially—lots of important international routes.
- US Airways is in sound enough financial condition to pull off a "minnow swallows whale" acquisition just as America West previously did with US Airways.
- American doesn't want to be forced into a shotgun wedding at this time. Its executives believe they can cut a better deal for American’s stakeholders after completing the bankruptcy process.
- Lots of industry mavens—including many financial types who orchestrate these big merger deals and profit through them—believe that merger is "inevitable" for American, and US Airways is the only viable partner.
- Those mavens also expect government approval—after all, if the government approved Delta-Northwest and United-Continental, it's hard to see how they might reverse course and disapprove American-US Airways.
The one other key fact is, of course, that consumers don't have a say in the outcome. And if they did, their response would likely be negative. Increased concentration hasn't helped consumers in any other market, and it isn't helping with the airlines.
Clearly, American and US Airways really don’t need to merge in order to survive. Several smaller lines, including Alaska, Hawaiian, and JetBlue, are succeeding without merging. But Wall Street smells money to be made. Stay tuned.
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